War/Conflict

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.

Higher oil prices threaten the global economy, warranting an underweight stance on equities. Over the long haul, industrial metals will fare better than crude.

Overnight, the Israeli military reported that it managed to kill two high-profile Iranian leaders: the Secretary of the Supreme National Security Council and the leader of the internal paramilitary group, the Basij. Meanwhile, the Gulf States reported more interceptions of drones and missiles from Iran.

The conflict in the Middle East persists as the US and Israel continue their strikes, and so does Iran’s retaliation with drones and ballistic missiles against the Gulf States. The Strait of Hormuz is still essentially closed, despite some ships being allowed to traverse.

With all eyes on the Strait of Hormuz, BCA Research has created a dashboard of data for your convenience.

Close oil trades tactically, but beware lingering economic costs of the Iran war this year.

It is too soon to sell the rip in oil or buy the dip in stocks. Stick with risk-off trades for now.

The US is likely to take significant military action in Iran, justifying our 40% risk of a major oil shock. Tactically go long Brent crude.

Our top five "Black Swan" risks this year are familiar but all too realistic in the current climate. Investors should stay overweight US equities and EM-ex-China until some hurdles are cleared.