Assess­ment on the Iran conflict

Escape to safety

Follo­wing the airst­rikes by the United States and Israel on Iran and the subse­quent retali­a­tory strikes, nervous­ness on the finan­cial markets has increased notice­ably.

In response to the escala­tion, investors sought safety in commo­di­ties, while shares trended slightly weaker at the start of the week.

Images / graphics: The graphics were produced by Tareno AG from public market data.

Energy at the center of the action

The conflict is having the greatest direct impact on the oil and gas market. Crude oil is trading around 8% higher than on Friday. Since the begin­ning of the year, the increase has even been around 30%.

The focus is on the strate­gi­cally central Strait of Hormuz. Around a fifth of the oil trans­ported by sea world­wide is shipped through this strait. If deliveries were to be affected by military escala­tion or blockades, it would be almost impos­sible to replace the supply in the short term.

Accor­dingly, energy stocks are in demand. Cyclical sectors and energy-inten­sive industries are on the losing side. Air travel has been hit parti­cu­larly hard: in addition to rising kerosene prices, the closure of airspace in the Middle East is weighing on opera­tional planning. Airline shares are there­fore among the biggest losers at the start of the week.

What happens next?

The duration and inten­sity of the disrup­tions in the energy and logistics sector will be decisive for further develo­p­ments on the finan­cial markets. The range of possible scena­rios is unusually wide and extends from a rapid diplo­matic de-escala­tion to a prolonged military confron­ta­tion with global conse­quences.

The negative scenario with syste­matic attacks on energy infras­truc­ture or a longer-term closure of the Strait of Hormuz would result in signi­fi­cantly higher oil prices, a renewed surge in infla­tion and a braking effect on global economic growth.

However, a massive and perma­nent disrup­tion to supply is not in the interests of the players involved, as it would also jeopar­dize their own economic stabi­lity. A complete escala­tion is there­fore not our base scenario.

What does this mean for the portfo­lios?

The major geopo­li­tical situa­tion has been tense for months. Accor­dingly, we have already taken this risk into account in advance by:

• A strategic gold alloca­tion
• A substan­tial propor­tion of Swiss francs
• Commit­ments in the commo­di­ties and energy sector

These building blocks increase the resili­ence of portfo­lios in the current environ­ment.

Classi­fi­ca­tion with a cool head

Due to the increased risks, caution is currently advisable. Should the conflict escalate unexpec­tedly or perma­nently affect struc­tural supply chains, the impact on growth and infla­tion could be substan­tial.

However, histo­ri­cally, war-related market declines were often tempo­rary and offered attrac­tive entry oppor­tu­ni­ties after­wards.

For the time being, we believe that oppor­tu­ni­ties and risks are balanced, which means that we see no need for action and are sticking to our well-balanced positio­ning.