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Adapting to rising risks of high-for-longer energy prices
Mar 19, 2026
- In recent days, oil and gas prices have spiked even higher, following the strike on Iran’s South Pars field and attacks on Gulf states’ energy facilities. Investors worry about the risks of further attacks on oil and gas fields or oil refineries
- In addition, the Strait of Hormuz remains de facto closed to energy and goods exports, without a clear plan of how it could be reopened. Energy shortages are already being felt in parts of Asia. And even if the conflict stopped tomorrow, it would take time for production to restart and for supply chains to normalize
- We still believe that the global economy is strong enough to absorb an oil shock and that the effect on markets should be temporary. But we want to make portfolios even more resilient to short-term volatility and the risk of higher-for-longer energy prices. This is why we are making a series of changes to our equity, bond and FX views that are all related to how they are impacted by higher energy costs
- In equities, we upgrade Canada but downgrade the UAE and India, leading to a downgrade of EM Asia from overweight to neutral. In the bond market, we upgrade UK inflation linked bonds but downgrade Indian local currency bonds and GCC USD bonds. And in FX, we upgrade CAD and MXN but downgrade INR, KRW and ZAR
- Our medium-term view remains constructive for risk assets, as we think stagflation remains a remote risk, especially in the US. Central banks told us this week that they do not want to jump to conclusions, and neither do we. Our view continues to be that USD depreciation is on hold for the duration of the conflict, and that US assets should weather the conflict better than European markets. We also continue to see opportunities across the AI ecosystem and highlight that many tech companies are now both more attractively valued and relatively insensitive to oil prices
- Our portfolio strategy remains positioned to capture solid earnings growth potential, but with an eye on managing volatility with multi-asset strategies and by diversifying our diversifiers, including high quality bonds and gold