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Metrobank US-Iran Risk Index: Mixed signals
Oil prices reversed their course following statements of talks between the US and Iran
By Metrobank Research, Investment Counselor Department
Metrobank’s US-Iran Risk Index settled at 134.4 on March 23, 2026, 9.1% lower than the level hit on March 20. This reversal can be attributed to financial market players pricing in less risk due to a fall in oil prices.
On Monday, US President Donald Trump announced he would postpone military strikes on Iran for five days after constructive talks between the two countries, with a potential deal on the horizon to settle the conflict. However, Iran has denied the discussions with the US. Regardless, global oil prices moved downward, as financial market players priced in hopes for a resolution to the conflict, with Brent crude settling below USD 100 per barrel for the first time in several days.
Meanwhile, the benchmark 10-year US Treasury yield closed lower by 3 basis points (bps), as inflation expectations slightly abated for the day. Dollar strength also waned, as safe-haven demand for the dollar went down, indicating that investors became marginally more risk-on with the news. Despite this, dollar strength still weighed on the peso during Monday’s trading session, Philippine time, with the local currency ending the day with its weakest close of PHP 60.30 per dollar.
Metrobank maintains the view that oil prices will stay elevated as long as the Strait of Hormuz, a critical transit point for global oil shipments, remains blocked. Conflicting statements from both sides of the conflict indicate uncertainty surrounding the timing of its resolution.
Meanwhile, high inflation due to rising oil prices will likely compel central banks globally to raise their policy interest rates this year, including the Bangko Sentral ng Pilipinas (BSP). While dollar strength may be challenged as a result, we still see 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.
What now?
| 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 the US Federal Reserve (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.)