With rising prices already on the minds of investors and consumers, the outlook in Europe remains challenged across supply chains, inflation rates and energy markets. Chief European Economist Jens Eisenschmidt and Global Oil Strategist and Head of the European Energy Team Martijn Rats discuss.-----Transcript-----Jens Eisenschmidt: Welcome to Thoughts on the Market. I'm Jens Eisenschmidt, Morgan Stanley's Chief European Economist. Martijn Rats: And I'm Martijn Rats, Morgan Stanley's Global Commodity Strategist and Head of the European Energy Research Team. Jens Eisenschmidt: And today on the podcast, we will be talking about the outlook for the European economy for the next 12 months in the very challenging context of rising energy prices and sustained inflationary pressure. It's Thursday, May 19, at 4 p.m. in London. Jens Eisenschmidt: So, Martin, I wanted to talk with you today about some burning issues that seem to be topmost on everybody's mind these days, namely rising energy prices and inflation. These challenges are affecting literally everyone. And Europe, in particular, is acutely feeling the impact from the war in Ukraine. Let's maybe pick up with a topic you discussed on this podcast back in January. So even prior to the war in Ukraine, you talked about five enduring tailwinds boosting commodities. So far in 22, commodities are on track to outperform equities for the second consecutive year. Now that we are approaching the mid-year mark, what's your outlook for the second half of 22 in terms of commodities and which ones are likely to outperform the most in the current environment? Martijn Rats: Some things have changed, but also a lot of things are still the same when it comes to the outlook for commodities. Commodities move in long cycles. The last decade was, on the whole, more challenging, but we think that we're still in the relatively early innings of what could be a long cycle ahead. You already mentioned the five enduring tailwinds that we've previously written about and discussed on podcasts like this. First of all, is inflation. Commodities often do well in inflationary periods, and the inflationary pressures are still there, that's one. Secondly, geopolitical risk. Thirdly, there's the energy transition. For a broad range of commodities the energy transition is a demand tailwind, but for a lot of others, it's basically a red flag not to invest in supply. Then fourthly, a lot of commodities have gone through a long period of very little investment. That sets up a tighter supply outlook. And then finally there's reopening. A lot of reopening has already played out, but there are still important pockets of reopening that have yet to fully materialize. A lot of that thesis is still the same. And I would expect that this will carry the commodity asset class for some time. Now, in terms of how things have changed at the start of the year, we were more optimistic about demand for a lot of commodities, and those expectations have come down a little bit because the economic slowdown, because of China. But we were also more optimistic about the supply for those commodities. We've seen a lot of headwinds in terms of the supply of a broad range of commodities, particularly because of the war in the Ukraine. So net net our balances are broadly still equally tight, if not slightly tighter, and that's to still set up the commodity asset class quite well. Also for the second half, the ones that we prefer the most, it's mostly the energy commodities. We think they'll do better than the metals. That is already happening as we speak, but there is more to come in that relative trade in the second half as well. Jens Eisenschmidt: Let's talk a little bit about oil. You've said that you continue to see upside to oil prices, even though the nature of your thesis has changed since the start of the year. Could you walk us through your thinking specifically around oil? Martijn Rats: Yes. At the start of the year, we were thinking th