DOWNLOAD
Metrobank US-Iran Risk Index: Faster inflation expected
Rising energy prices factored into the recent policy rate decision of the US Federal Reserve
By Metrobank Research, Investment Counselor Department
Metrobank’s US-Iran Risk Index settled at 143.8 on March 18, 2026, 2.9% higher than the previous day. This marks another all-time high for the index.
Military attacks continued on Wednesday as Iran’s South Pars gas field was struck by Israeli forces, according to Al Jazeera. Iran retaliated further with attacks on various energy facilities across the Middle East. These violent exchanges led to oil prices rising, with Brent Crude settling higher at USD 107 per barrel.
Meanwhile, higher inflation expectations due to the Middle East conflict compelled the US Federal Reserve (Fed) to hold their policy rate steady on Wednesday. While the decision was supportive of the dollar, the benchmark US 10-year Treasury yield climbed by nearly 7 basis points (bps) as a result. Fed Chair Jerome Powell said that while US energy prices are expected to rise due to the conflict, the long-term economic effects remain to be seen.
We maintain our expectation for upside oil risk to endure, as the Middle East conflict rages on. Because of this, we expect the US Fed to momentarily pause its easing cycle in the coming months as energy prices rise. Domestically, we forecast the Bangko Sentral ng Pilipinas (BSP) to preemptively end its easing cycle, with possible rate hikes on the table this year as local inflation accelerates.
Additionally, dollar strength will still persist, as safe-haven demand continues. This puts pressure on the peso and will keep the dollar-peso exchange rate elevated in the near future.
Metrobank Research’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. Focus on liquid 2–5-year tenors and add only on yield spikes or auction‑driven dislocations. Avoid extending until foreign-exchange and geopolitical risks ease. |
| Local Equities | Bearish | Expect bargain hunting of cheaper names in the near term. However, gains may remain capped amid oil volatility and developments in the Middle East. Buy on dips and take profit in rallies. |
| Global Fixed Income | Bearish | Position in short-dated (up to 5 years) quality bonds, as inflation fears push yields upward. Expect volatile swings, as headlines drive market sentiment amid uncertainty. |
| 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 | Bullish | Buy US dollars on dips or near the 59.50–59.70 support levels. The ongoing US–Iran tensions show little sign of easing, which should continue to drive safe-haven demand and put pressure on the peso. Persistent inflation pressure will likely influence the future policy paths of both the BSP and the US Federal Reserve, providing additional support for the dollar. |
| G10 Currencies / US Dollar | Bearish | The prolonged conflict continues to favor the US Dollar over its G10 counterparts, though recovery may be sharp once risk sentiment improves. Major currencies like the EUR, GBP, and JPY are now at key levels and may see fresh lows if elevated energy prices are sustained. |
| Gold | Bullish | While initially reaching highs of USD 5,400 per troy ounce on safe-haven demand, gold has pared gains after higher oil prices sparked expectations of faster US inflation, delayed US Fed rate cuts, and a stronger USD. The precious metal has fallen just slightly below USD 5,000. Any further dip below USD 4,900 and we could see new entry opportunities at the USD 4,800 and USD 4,600 areas. Our long-term view is steady price appreciation as global central banks purchase gold to diversify reserves beyond the 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.)