Investing.com -- Deutsche Bank strategist Henry Allen told clients in a note Wednesday that financial markets have followed a familiar stagflation playbook as the Middle East war drags on, but the scale of the selloff remains far short of the shocks seen in 2022 or the 1970s.

Allen wrote that global bonds and equities have seen a “synchronised decline,” echoing previous oil-driven downturns.

But he stressed that “we haven’t yet seen the scale of the moves that occurred in either 2022 or the 1970s,” largely because the economic fallout has been less severe so far.

According to Deutsche Bank, there are three key differences.

First, markets “still aren’t pricing in a sustained oil shock,” with six-month Brent futures “only at $84/bbl,” compared with months spent near $100 in 2022.

Second, “there hasn’t yet been any monetary policy tightening by major central banks,” unlike the rapid rate hikes that defined 2022.

Third, early activity data remains resilient, with the flash composite PMIs for March “still in expansionary territory in the Euro Area, the UK, and the US,” a contrast with downturns seen after the 1970s oil crisis and the Gulf War.

This backdrop is said to help explain why “we haven’t seen bear market-like declines in the US and Europe.”

Still, Allen warned that historical patterns offer clues on what could come next if the shock persists.

In past episodes, “equities generally had a tough time across sectors,” with energy the lone consistent outperformer.

Sovereign bonds also fell sharply, though countries able to contain inflation, such as Germany and Switzerland in the 1970s, fared better in real terms.