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Metrobank US-Iran Risk Index: A weak peso
Faster inflation and global uncertainties led to a historical low for the Philippine peso
By Metrobank Research, Investment Counselor Department
Metrobank’s US-Iran Risk Index settled at 147.8 on March 20, 2026, 2.1% higher than the 144.8 on March 19. This marks another all-time high for the index.
Brent crude prices rose on March 20 to what was then their highest level in nearly four years at USD 112 per barrel as military attacks in the Middle East pressed on. The conflict showed no sign of abating during the trading day, with Reuters reporting that the US plans to deploy thousands of additional troops to the area.
Meanwhile, global bond yields rose, as financial market players priced in higher inflation expectations, with the benchmark 10-year US Treasury yield closing the day 13 bps higher. As central banks across the globe start to pivot toward increasing their policy interest rates, the US dollar’s safe-haven appeal may slightly wane, especially as the US Federal Reserve’s (Fed) monetary policy path remains uncertain. Still, high demand for the dollar led to the dollar-peso exchange rate breaching 60 for the first time last week.
Metrobank maintains the view that oil prices will continue to rise for as long as the Strait of Hormuz, a critical transit point for global oil shipments, remains blocked. Over the weekend, US President Donald Trump threatened to strike Iran’s energy infrastructure if the strait remained closed. Iran responded by reiterating their commitment to keeping the passage closed should the US attack, further cementing upside oil risk.
Meanwhile, high inflation due to rising oil prices will likely compel central banks globally to raise their policy rates this year, including the Bangko Sentral ng Pilipinas (BSP). While dollar strength may be challenged as a result, Metrobank still sees the dollar-peso exchange rate staying elevated in the near-term as steady dollar demand weighs on a historically weak peso.
Metrobank’s US-Iran Risk Index measures the amount of risk that the ongoing conflict presents to financial markets. It considers the general risk sentiment of investors and inflationary pressures brought on by the conflict. A value of 100 denotes a normal level of risk based on market levels prior to the conflict’s escalation, while values greater than 100 imply increasing levels of risk.
| Asset Class | Outlook | Strategy |
|---|---|---|
| Local Fixed Income | Bearish | Stay defensive on duration amid elevated foreign-exchange volatility. Focus on liquid 2–5-year tenors and add only on pronounced yield spikes. Avoid extending duration, especially at the long end of the yield curve, until peso conditions and global risks show clear signs of stabilization. |
| Local Equities | Bearish | Expect bargain hunting of cheaper names in the near term. However, gains may remain capped amid oil-price volatility and developments in the Middle East. Buy on dips and take profit during rallies. |
| Global Fixed Income | Bearish | Continue to favor short-dated quality bonds up to 5 years, as inflation fears push yields upward. Expect yields to stay elevated as geopolitical tensions keep investors cautious. |
| Global Equities | Neutral | Maintain a defensive approach by prioritizing high-dividend sectors while taking advantage of volatility to accumulate select quality-growth names. |
| USD/PHP | Rangebound | Buy US dollars on dips or near the 59.85-60.15 support levels, as short-term fundamentals favor a mildly firmer USD after Fed maintains its policy. Still, elevated energy prices and geopolitical risk will provide demand for USD. The market is expected to trade on headlines for the lack of high-impact US and Philippine data release this week. |
| G10 Currencies / US Dollar | Bearish | Major currencies EUR, GBP, and JPY see some recovery following their respective central banks’ decision to pause. However, inflation concerns driven by higher-for-longer oil prices continue to weigh on global growth prospects, weakening G10 economies dependent on energy imports while safe-haven trades favor the USD. |
| Gold | Bearish | Consistently elevated oil prices have driven hotter US inflation and delayed Fed rate cut expectations, contributing to a stronger US dollar and lower gold prices. The precious metal has broken through key levels at USD 4,600 and USD 4,400 and the next key supports are expected at USD 4,100 and USD 3,600. However, our long-term view is still for gold to outperform as global central banks diversify their reserve assets away from USD and US Treasuries. |
(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.)