LIVE MARKETS-Hold your nerves - Barclays
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HOLD YOUR NERVES - BARCLAYS
Barclays equity strategists say the weekend's sharp escalation in the U.S-Iran conflict increases stagflation risks, compounding an already cautious market backdrop shaped AI‑driven disruption and credit concerns.
But their advice? "Hold your nerves and your hedges."
Barclays says the build-up was well flagged, with geopolitical risk premia across markets already having risen in recent weeks.
"...oil prices are up 20% ytd and at five-month highs, US yields have fallen 30bp from recent highs and defensives have outperformed cyclicals," says the team.
Even so, the fact that most non-US indices are trading near all-time highs - and no "endgame" is in sight - introduces vulnerability.
Sky-high stocks could see more profit taking if the situation worsens, say the strategists.
Oil is key.
"Our energy strategists see a scenario where Brent could approach $100/b should markets price in a material supply disruption amid heightened regional security risks," they say, adding that OPEC boosting output over the weekend might help.
"Energy sensitive economies in Asia such as Korea, India, Japan and China (the largest importer of Iranian oil), as well as Spain and Italy in Europe, may be the most affected should oil market tensions intensify further," says Barclays.
They remind that geopolitical driven pull-backs are typically short-lived in markets, giving long-term investors a good buying opportunity.
And while stagflation risks are on the up, the developments come against a favourable growth-policy mix coupled with resilient earnings.
(Lucy Raitano)
EARLIER ON LIVE MARKETS:
STOXX SHUDDERS AS IRAN CONFLICT LIFTS OIL, SINKS TRAVEL CLICK HERE
BEFORE THE BELL: EUROPE'S FUTURES DOWN SHARPLY; DEFENCE, AIRLINES, OIL STOCKS ON THE RADAR CLICK HERE
DIRE STRAITS FOR GLOBAL OIL TRADE CLICK HERE
