Economy3 MIN READ
Metrobank US-Iran Risk Index: Waiting for clarity
Market players have become less optimistic about a lasting deal between the US and Iran.
by Metrobank, Investment Counselor Department
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Metrobank’s US-Iran Risk Index settled at 133.6 on April 16, 3.7% higher than the prior trading day.
Risk levels rose as market players became less optimistic about a deal between US-Iran. Brent crude prices rose to just under USD 100 per barrel on Thursday as no developments were reported regarding a resumption of US and Iran talks, despite US President Donald Trump saying he was confident a deal would be reached soon. Markets weighed this against persisting oil supply pressure leading to elevated oil prices.
Meanwhile, the US dollar regained some of its strength as investors moved back into the safe-haven asset while awaiting news of a potential deal. Higher oil prices also pushed the benchmark 10-year US Treasury yield upward by nearly 3 basis points.
Israel and Lebanon agreed to a 10-day ceasefire, which may be a signal towards broader easing of tensions in the Middle East. Still, concrete developments between the US and Iran will likely remain the largest driver of risk sentiment among market players in the coming days.
Metrobank still sees high risk and volatility in the near-term. Oil prices are poised to stay high as global supply remains constricted. Moreover, domestic inflation is expected to accelerate, as local energy prices stay high, which will likely compel the Bangko Sentral ng Pilipinas (BSP) to raise their policy interest rate this year. Finally, Metrobank expects the dollar-peso exchange rate to stay elevated, as dollar demand weighs on a 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 pressure brought 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.
What now?
What now?
Category
Local Fixed Income
Outlook
Bearish
Strategy
Stay defensive in the 2 to 5‑year sector amid foreign exchange‑driven volatility and upcoming supply, adding when there is a better yield premium. Maintain selective exposure to 7- to 10‑year tenors for carry and relative stability, while positioning for range‑bound, headline‑driven trading.
Category
Local Equities
Outlook
Bearish
Strategy
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.
Category
Global Fixed Income
Outlook
Bearish
Strategy
Position in liquid, high-quality papers in the 2- to 5-year space while waiting for clearer signs of risk-on sentiment. Yields are likely to remain rangebound for the week, as markets remain headline-driven related to Middle East developments.
Category
Global Equities
Outlook
Neutral
Strategy
Maintain a defensive positioning, with a focus on high-dividend and resilient sectors, alongside selective interest in quality growth names amid ongoing volatility. Elevated geopolitical risks are contributing to renewed strength in oil prices through a higher risk premium in energy markets and may continue to limit sustained upside in global equities.
Category
USD/PHP
Outlook
Bullish
Strategy
Market hopes for a deal between the US and Iran has led to notable outflows from the US dollar as a safe-haven asset. USD/PHP has moved within the 59-60 levels in the past few days, with markets once again bracing for a protracted conflict and the potential for hawkish central bank pivots in response to current events. Still, mid-year seasonality and a weak peso will likely elevate spot in the coming months, so opportunistic buying at dips is ideal.
Category
G10 Currencies / US Dollar
Outlook
Neutral
Strategy
Easing tensions turn G10 currencies broadly bullish as markets turn optimistic on the likely second round of US-Iran talks. Year-to-date, the outperformer is the AUD, while growth and inflation concerns send the JPY to the bottom among major currency peers. While Brent prices have slipped below the 100-mark, global economies remain wary of second-round inflation as prices remain relatively elevated.
Category
Gold
Outlook
Neutral
Strategy
With tensions easing in the Middle East, fund outflows from safe haven US Treasuries and the dollar have found their way back into gold and precious metals. While near term resistance remains at USD 4,900 to USD 5,000 on residual risks, a long-term bullish view on gold remains intact as global central banks continue to diversify reserves away from the US dollar 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.)
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