Iran
Over the past 48 hours, there has been a cacophony of statements back and forth between Tehran and Washington, DC, some suggesting that the probability of de-escalation is rising. At the same time, kinetic action has continued unabated. A Kuwaiti tanker was targeted by Iran off the coast of the UAE, followed by a Qatari tanker off Doha, and the US ramped up its attacks on Iranian industrial capacity. The world now awaits with great anticipation President Trump’s remarks to the nation on April 1.
We explore how markets reacted to different oil supply shocks in the past, how conditions differ today, and provide a playbook for investors to navigate the current crisis. Remain neutral between equities, bonds, and cash. Downgrade Tail Risk Strategies from Max Overweight to Overweight.
We are pleased to introduce our new Quarterly Investment Outlook, a joint publication bringing together the European Investment Strategy (EIS), Global Fixed Income Strategy (GFIS), and Foreign Exchange Strategy teams.
The main takeaway of the current edition is that investors should not add risk. Markets are still focused on inflation, but the binding constraint is growth: if the energy shock persists into mid-April, a rapid shift toward recession pricing will follow.
Over the past month, oil market participants have scrambled to fill the gap in global oil supply caused by the Strait of Hormuz’s closure. While these efforts have been impressive, the scale of the disruption means they are ultimately insufficient. Upside pressures will continue to dominate energy prices until transit through the Strait of Hormuz is restored.
One month into the Iranian conflict, we take stock of how markets have moved so far and how some of the big open questions might influence them going forward. A long opportunity may be developing at the long end of the Treasury curve.
In Section I, Doug argues that investors should maintain mildly defensive positioning while awaiting the restoration of normalized shipping flows through the Strait of Hormuz. In Section II, Jonathan examines the humanoid robot segment of the emerging physical AI landscape, concluding that humanoid robots are a potential but not yet imminent investment theme.
The Iran war may not deescalate in the near term, and if it does, it will likely reescalate later this year, suggesting investors should take a cyclically defensive outlook.