The financial giant BlackRock remains underweight long-term U.S. Treasuries amid the airstrikes in Iran, which are spurring an energy-led supply chain shock.
In a new commentary, analysts at BlackRock Investment Institute say oil futures pricing suggests “disruptions could last for weeks, not months.”
“The episode adds to inflation risk in a world shaped by supply factors. That’s why long-term Treasury yields have edged up, defying their role as a haven. There’s a risk of a stagflationary shock, but it’s not a given, as market pricing indicates. We stay underweight long-term Treasuries and favor US stocks.”
The analysts note that international equities were outperforming US stocks until the US and Israeli airstrikes. That flipped after the conflict erupted, with equities from regions dependent on energy imports suffering.
They do argue, however, that economic and political pressures could help contain the conflict in Iran.
“And disruptions could ease in the meantime if US naval escorts and shipping insurance prove effective in preventing a prolonged closure of the world’s energy aorta – the Strait of Hormuz. The net result of all this: a short-term supply squeeze with disparate regional effects.”
BlackRock also continues to be overweight Japanese equities due to “strong nominal growth and corporate governance reforms.”
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