Global Equity Volatility Insights: BRI again flags risks that valuations miss

Research evidence excerpt

Global Equity Volatility Insights: BRI again flags risks that valuations miss

BofA GFSITM X-Asset Risk Landscape

Commodities & equities lift GFSI with Iran escalation

The GFSI increased over the last week, rising from ‑0.20 on 10‑Jul‑26 to ‑0.11 on

17‑Jul‑26. Although stress has now increased for two straight weeks with the renewed

escalation in Iran, the GFSI is still low relative to history in its 33rd percentile since 2000.

Commodities and equities once again drove the moves in stress with crude implied vol

and S&P 500 skew posting the top gains in stress last week by a considerable margin

(Exhibit 3). In fact, these subcomponents recorded 96th and 93rd percentile gains in stress

relative to their own histories (Exhibit 6). Crude implied vol is now back in bearish

territory with stress more than half a standard deviation above median levels, but stress

is well off its 2026 high of 4.54 on 12-Mar (Exhibit 2). Commodity vol was the largest

stress-gainer versus all cross-asset vols and spreads with gold implied vol stress also

rising (Exhibit 3 & Exhibit 7).

The other asset classes experienced smaller moves in stress with rates and credit stress

slightly increasing while FX stress mildly declined (Exhibit 4). Tibor-OIS has been the

most stressed subcomponent since 26-May and recorded the third largest increase in

stress last week (Exhibit 2 & Exhibit 3). Meanwhile, 3Y/5Y credit curve EUR led credit

stress higher (Exhibit 3). FX and commodities remain the least and most stressed asset

classes, respectively (Exhibit 4).

• Govt-OIS USD posted the largest stress decline last week (Exhibit 3).

The bulk of the fall came on Tuesday when US inflation came in below

expectations.

• All regions except EM saw stress increase last week (Exhibit 5).