Our views
The events unfolding in Iran is not a regime shift like Venezuela, or even a broader dismantling of the country’s command structure, given that governance in Iran is institutionalised. We continue to monitor events to help map out what lies ahead for markets.
Macro - Stalemate deepens while US remains biased against full restart
1 May 2026
The recent news flow has reinforced our base case of an elongating stalemate in the conflict, with a parallel cat-and-mouse signalling game, rather than a clean diplomatic turning point.
On Wednesday (29 April), US President Trump formally rejected Iran’s latest offer to reopen the Strait of Hormuz in exchange for the US lifting their blockade, with nuclear negotiations to be renewed at a later stage.
Tehran has responded with renewed defiance, including warnings that any ongoing blockade will be met with “practical and unprecedented action”. In other words, Iran still looks to be testing US patience and trying to separate immediate economic relief from the harder nuclear concessions Washington is actually looking for.
As a result of this deadlock, the news flow has now turned back to potential military options the US has at its disposal. However, it is not obvious to us how the “short and powerful” strike option now being prepared by the US breaks this deadlock. Rather, this looks more like coercive pressure than preparation for a full restart of the war. Our read is that limited strikes are at least as likely to provoke further disruption as to unlock diplomacy, either through a tighter Iranian chokehold on the Strait of Hormuz or heightened threat to Gulf oil infrastructure.
Alongside strikes, Washington is also looking at how it can get commercial shipping traffic moving again. All this supports our view that President Trump’s revealed preference is still to maximise leverage without reigniting a full conflict, even if that approach means significant disruption to global energy supplies in the short term while the stalemate drags on.
Furthermore, we disagree with the consensus view that Iranian oil well shut-ins are either imminent or structurally damaging. Iran has been able to carry out such measures in the past without any serious repercussions to production.
And while onshore oil storage is filling up, the amount of floating storage Iran has available in the Persian Gulf implies an additional 2-3 months of capacity, contrary to the less than one month estimates that have has been forecast by some.
All this implies the primary mechanism of the US blockade will be an economic squeeze, but history would suggest Tehran is willing to absorb significant economic pain before it changes course.
Our take on UAE’s exit from Opec
The UAE’s decision to exit Opec effective 1 May 2026, is a signal of the broader geopolitical ramifications of the conflict. The move reflects longstanding frictions with Saudi Arabia, which has been compounded by persistent disagreements over production quotas - an issue that carries greater weight in today's world of elevated oil prices. While this marks a significant rupture in the 65‑year‑old partnership, the oil market's response has so far been relatively muted.
The UAE is Opec’s third‑largest producer and among the few members with meaningful spare capacity, now around 4.8 million barrels per day - versus pre‑conflict output of around 3.6 mb/d - and rising toward 5 mb/d by 2027.
Over the medium to longer term, Abu Dhabi is likely to lean into this expansion, which supports balance restoration initially, but ultimately erodes Opec’s ability to control prices through coordinated supply discipline. These effects are already visible in the curve, with longer‑dated crude pricing softening relative to pre-announcement levels, even as the front end has surged by more than 12 per cent this week.
Webinar replay: Translating macro views to portfolio action
20 April 2026
The US-Israeli attack on Iran and the events that followed appeared to upend many of the assumptions investors held going into 2026. However, several important underlying trends remain intact.
The immediate macro shock of the conflict in the Middle East has been severe, most notably in disrupting energy supply chains passing through the Strait of Hormuz.
However, the International Energy Agency has released around 450 million barrels from its strategic reserves. China too has been covering its own domestic demand through with its own reserves. This oil market equivalent of quantitative easing has mitigated the impact on the oil price. Were the conflict to end soon, as we expect, the oil price should settle at around US$80 to US$85 per barrel for the rest of the year.
Moreover, the macro picture heading into the crisis was relatively strong. We entered the year anticipating reflation in the US, propelled by supportive fiscal measures, coupled with an improving picture in Europe and China too. Earnings were strong and momentum has continued there too.
So for now, this shock is manageable. We don’t expect a global recession, nor stagflation. We anticipate one further cut to rates from the US Federal Reserve, one hike from the European Central Bank, and no cuts from the Bank of England. As things stand, economies can absorb this shock without massive disruption.
It is important to note however that the system will start to come under real pressure if the conflict goes on for another month or longer.
Regional allocation and growth
We entered 2026 with emerging markets as a consensus trade. The conflict in the Middle East has clearly changed that thinking. Around 80 per cent of the traffic transiting the Strait before hostilities began was destined for Asia, which has felt the effects of the conflict most. And while consumers in the US are still feeling the price effects - paying more at the pump, for instance - the US can ultimately reduce its own energy exports if things get too tight. We agree with the International Monetary Fund’s expectations of only a 10-basis point hit to US growth this year.
From an allocation perspective, the emerging market trade is still intact, but it is now more nuanced. The energy shock driving this is having opposite effects on Asia and Latin America, the latter of which export oil and are benefitting from the production squeeze. So we’re willing to take some risk on markets like Brazil for instance.
On equities more broadly, risk sentiment is starting to come back after a month of sustained volatility. We have kept our positions either neutral or long through this period, since we were positive on risk before the conflict. We are now looking to redeploy some risk into areas that have the most upside opportunity.
Earnings should continue to climb. A lot of the structural drivers supporting equities before the crisis - such as the AI datacentre rollout - have not gone away. The technology sector is of particular interest to us. The recent volatility has reduced valuation multiples in some areas, while earnings remain resilient.
Asset classes
One thing that has been difficult for investors to contend with through this crisis is that correlations between different asset classes are turning increasingly positive. That’s making it hard to find protection from volatile equity markets.
There are ways around this. We’ve been using put options, and staying well diversified across different regions and themes. The performance of certain alternative asset classes has been helpful also.
Within bond markets, duration has not been kind to investors. Where we do see opportunities for mispricing is towards the front end of some government bond curves, in the UK for instance, where we doubt the several hikes priced into the market will materialise. We don’t think spreads in investment grade compensate you for the risk, so we’ve been deploying some of that money back into high yield and emerging market debt.
Longer term
There have been question marks over what all this means for longer-term trends we had previously highlighted, like de-dollarisation and a shift towards global fragmentation.
On the former, the reality is that 90 per cent of FX trades are still done against dollars. There really isn’t an obvious alternative currency at the moment. The dollar probably will continue to weaken for all the reasons it was depreciating before the conflict, but it will remain the world’s reserve currency nonetheless.
What the conflict in the Middle East does do is reinforce the idea of a more fragmented world, as regions look to further increase their defence spend, bolster their energy supply lines, and protect their tech sovereignty.
More broadly, this is an incentive to prepare portfolios for volatility, stress-test them for different scenarios, and avoid relying on historic correlations. There will be more uncertainty in the near term, regardless of what happens in the Middle East, with the US midterms approaching and questions over Jerome Powell’s position as Chair of the Fed due to increase. There is plenty of noise in the news at the moment, but our job is to pay attention to the underlying data and make sure that feeds into our investment process.
The sectors most affected by the Strait of Hormuz disruption
23 April 2026
The conflict in the Persian Gulf threatens widespread economic damage. But the first and second-order effects across and within sectors are uneven.
We asked analysts from our research team how the disruption to shipping in the Strait of Hormuz is playing out across energy, materials, and marine transport sectors, and where they see things going next.
Oil market seems complacent about the physical realities of production
Peter Low, Energy
Coming into the year the market expected oil to be oversupplied and was therefore rather bearish on the outlook for oil prices. However, the closure of the Strait of Hormuz has removed that oversupply risk, and the need to rebuild inventories will probably extend market tightness into at least 2027. An elevated geopolitical risk premium is also likely to linger, implying higher-for-longer oil prices.
The European oil majors, which I cover, are benefitting across their businesses. They span the entire value chain, from upstream oil and gas production to downstream refining, marketing, and trading.
Some of my companies have assets in the Middle East that have had production shut-ins, reducing or stopping production in response to the Strait’s closure. However, the impact of this is more than offset by higher oil prices, while market volatility has also boosted trading divisions.
As for the broader market, I detect a complacency about the physical realities of the current situation. Logistical constraints mean shut-in production won’t return immediately when the Strait re-opens. It will also take time for some mature fields to return production to pre-conflict levels, with a large number of new wells potentially needing to be drilled.
The big unknown is how long that will take. Companies we have spoken to give a range of estimates but tend to be in the weeks rather than months camp, but that is still a lot of lost production. And that’s on top of what’s already been lost - some estimates I’ve seen imply that by 15 April we had already ‘lost’ production equivalent to the entire Strategic Petroleum Reserve (SPR) release announced by the International Energy Agency on 11 March.
Until the Strait is re-opened and traffic largely normalises, the situation gets worse each day, and I’m not convinced that’s fully priced in.
Asian refiners face a shortage of crude feedstock
Eliza Tay, Energy
The most direct beneficiaries in my coverage from higher oil prices are the upstream producers.
The picture is more nuanced in refining. Some Asian refiners are seeing run cuts due to a shortage of crude oil feedstock, but here too the market is tight, with jet and diesel crack spreads – a measure of refiners’ profit margins – more than trebling since the conflict began.
Some naphtha crackers (petrochemical plants) have announced force majeure because of the Strait of Hormuz closure and the run cuts by refiners. Those companies with more secure feedstock supplies are therefore benefiting from a tighter market here.
Looking ahead, non-OPEC, non-US supply from countries like Brazil, Canada, and Guyana appears to have limited potential for growth, while US shale is maturing. Longer term, this could potentially mean more oil and gas capex is needed to support supply.
On the demand side, countries in Asia will now have to rethink their energy security needs, while the need to replenish the SPR will also support medium-term demand. The oil price should also be supported by a higher geopolitical risk premium over the next decade given what’s happened.
Chemicals sector disruption will play out in three phases
Lewis Cheetham, Materials
Around 30 per cent of traded urea and nearly 45 per cent of global sulphur supply usually pass through the Strait. Both commodities are used to make fertiliser, something countries are now struggling to import as much of as they would like. Nitrogen fertiliser prices meanwhile are now nearly double their pre-conflict levels.
The disruption will have an increasing impact on many other household goods. For example, we are seeing surcharges of 10-20 per cent on paint products and inflation on food packaging prices is north of 50 per cent.
As to where we go from here, I look at the supply shock in terms of three phases. We are still in Phase 1, in which companies whose supply chains are unaffected can take advantage of global shortages to raise margins.
Phase 2 is demand destruction, when chemical customers begin to fear a demand shock resulting from inflated prices and the general macro repercussions. The impulse will be to destock raw materials and reduce purchases from chemical companies, which should be the peak for margins for western chemical producers.
Phase 3 is for the Strait of Hormuz to reopen and crude oil to start flowing more freely to Asia. There will then be a lag of around four months as refineries process this oil into naphtha feedstock.
In terms of longer-term implications for the sector, I would expect an increased focus on having domestic supply for key raw materials, especially fertiliser, given how fragile global supply chains have proven to be over the past decade.
There are also examples of permanent damage to assets in the Middle East, such as Liquefied Natural Gas (LNG) supply and petrochemicals capacity. This might lead to higher-for-longer prices for basic chemicals even once the conflict has ended.
Companies that have a demonstrated history of pricing power should be able to recover their gross margins over the coming months as they pass through this cost inflation to customers. Investors could therefore look for these types of businesses among those that have sold off due to oil and other chemicals being important parts of their raw material cost basket.
Materials sector impact is broad-based but varied
Laura Stafford, Materials
Oil & gas has dominated the headlines, but the market has also tightened significantly in fertilisers and aluminium. Constrained energy and feedstock supply – for example, gas used for fertiliser production, or sulphuric acid used in copper production – drive higher cost inflation and ultimately can lead to curtailed production.
Fertiliser producers with low-cost feedstock should benefit from higher fertiliser prices, with a similar dynamic playing out in aluminium. In both of these cases I think valuations don’t fully reflect the level of tightness in the market.
By contrast I am more cautious on copper producers. Valuations are almost back to all-time highs, with the copper price sitting at similarly high levels despite ample material in the market, growing inventories, and what I would view as an inevitable impact on demand from the conflict.
That said, because the conflict has brought security of supply back into focus there will likely be further measures to support domestic supply where possible. It will likely also spur a faster move away from oil and therefore support demand for transition metals like copper, so it’s a question of valuations and timing here.
Marine transport: Tanker operators and shipbuilders appear to be the main beneficiaries
Amara Xia, Industrials
One immediate effect of the conflict has been a sharp rally in freight rates. While shipping volumes have declined, ton mile demand, which measures tonnage multiplied by distance travelled, has been partially offset by materially longer voyage distances. Tanker rerouting, particularly from the Middle East to East Asia via the US, has effectively doubled average haul lengths in some cases.
Meanwhile, many merchant vessels have been trapped inside the Persian Gulf, with a significant reduction in transit traffic. There are also vessels currently positioned outside the Gulf of Oman that are likely to rush back in immediately after reopening to load and arbitrage. Tanker flows are being redirected to alternative loading regions, such as Saudi Arabia’s Yanbu port near the Red Sea and the Atlantic Basin.
Tanker operators and shipbuilders appear to be the main winners. Market dislocation tends to benefit tankers disproportionately because higher freight rates improve near term earnings visibility and cash flow generation, while tighter supply of tankers supports asset values. A sustained increase in freight rates is also likely to translate into increased tanker orders, supporting the shipbuilding cycle.
The events of recent weeks have also reinforced the strategic importance of tankers as critical assets for energy logistics. Over the medium term, stronger demand to restock oil and increased import diversification by Asian countries could materially support shipping demand. The now heightened risk of a Hormuz blockage increases perceived supply vulnerability, encouraging higher inventory buffers in Asia.
More structurally, diversification of crude sourcing is likely to shift barrels toward longer haul routes, supporting a sustained increase in ton mile demand. Together, energy restocking, altered trade flows, and longer voyage distances point to a constructive demand outlook for the tanker market beyond the immediate disruption.
Power generation: Europe needs grid build-out
Gregory Despard, Utilities
For power generators, higher power prices should translate into higher profits if sustained, while volatility in power and resource prices should generally be positive for trading revenues, although with much of 2026 already fully hedged, it may be several quarters before we start to see a material impact on earnings.
Much of the impact from the conflict however depends on where a company operates. Power prices in Spain, for example, where renewables constitute a significant share of generation, are much more stable than those in Germany, where gas power plants are a larger share of the market.
Companies without revenues from generation are more-or-less unaffected, as they can mostly pass on inflation to customers, while supply chains in my coverage have not seen material disruption. Companies are more concerned about changes to interest rates as a result of current events.
Within the context of my coverage, the most significant long-term implication from the past few weeks is that countries will place even more focus on energy independence. I would expect more political support for new generation build out, especially renewables, and higher returns and/or increased growth opportunity for companies that touch this theme.
I’m therefore bullish on names that facilitate expanded power generation in Europe. The grid is the biggest constraint to the build-out of new generation right now, making networks companies especially attractive. I’m also optimistic on the companies that provide equipment, either to grid build-out or the construction of new power generation.
I would avoid some companies with significant power generation exposure which are operating in countries where renewables penetration is extremely high. Countries will also need to provide attractive regulatory environments to bring in capital, so I’m wary of those operating where the risk of political intervention is elevated.
I see instances of companies where the benefits of higher power prices are over-estimated by the market, which underestimates the ability of governments to tax away windfall profits or the lack of sensitivity of a country’s power prices to gas prices.
