Iran War & China-US Trade Probe Pull Stocks Lower | The Pulse 3/27
Speakers
Summary
- SocGen's baseline scenario for de-escalation is shifting to a more bearish case where Brent crude could reach $150/barrel in April, representing a new paradigm for energy markets.
- Several Asian economies are identified as highly vulnerable to sustained high oil prices and shortages due to low reserves: Philippines, Thailand, India, South Korea, and Japan.
- The fixed income strategy in this volatility is to focus on diversification, income generation, and selectively adding risk in areas where spreads have widened.
- A critical, under-the-radar risk is the impact on agricultural fertilizers and the upcoming global growing/planting seasons, which could become a more pressing issue in the coming weeks.
- The Iran war and Ukraine conflict are linked, with intelligence sharing between Russia and Iran noted as a point of cooperation and a reason for continued pressure on Russia.
- France's position is clear: the war is "not our war," and they do not want to be entangled, despite discussing a defensive, post-bombing coalition to secure the Strait of Hormuz.
- Iran's draft bill to impose tolls on Hormuz transit is seen as a show of confidence and a strategic nightmare for the West if Iran gains any formal control post-conflict.
- The U.S. faces domestic pressure to resolve the conflict due to soaring gasoline prices ahead of midterm elections, creating a time-sensitive political problem.
- Gold has acted counterintuitively, falling ~17% since the war began, attributed to liquidation for cash, a stronger dollar, and a shift in Fed expectations from cuts to potential hikes.
- Aluminum stands out among base metals due to regional supply risk, with ~9% of global production located in the Middle East and exports currently blocked by the Strait of Hormuz closure.
- A potential longer-term theme is the re-initiation of inventory restocking cycles across supply chains as entities realize new vulnerabilities, which could support demand for metals like copper.
Trade Ideas
The speaker explicitly names the Philippines, Thailand, and India as economies vulnerable to high oil prices and shortages, citing severe stress due to their status as huge oil importers, particularly from the Strait of Hormuz. Many countries have less than 30 days of oil reserves left. Sustained high prices and supply disruptions will directly impact these import-dependent economies. These countries are in "severe stress" and are areas of concern, implying unattractive risk profiles for investment. A rapid de-escalation and normalization of oil flows and prices.
SocGen's commodity research team is shifting its baseline scenario from de-escalation to a more bearish case, expecting a "paradigm shift" in energy markets with Brent moving from ~$100 to $150/barrel in April. The prolonged conflict is hitting "longer scenarios," and the market has not priced in this new, sustained high-price paradigm. A major repricing of oil is imminent if the Strait of Hormuz remains closed, with severe global economic consequences. A swift diplomatic resolution and reopening of the Strait of Hormuz.
Gold has fallen ~17% since the Iran war began, contrary to its typical safe-haven role. This is attributed to its liquidity (sold to raise cash), a stronger dollar, and a shift in Fed pricing from rate cuts to potential hikes. The current shock has inflationary implications that may force central banks to hold or hike rates, which is negative for non-yielding gold. Technical selling has also occurred. The traditional "real asset" and safe-haven narrative for gold is being overwhelmed by monetary policy and liquidity dynamics in the short term, leading to weak performance. A severe escalation that triggers a flight to safety overwhelming rate concerns, or a rapid pivot back to Fed easing expectations.
Approximately 9% of global aluminum production is in the Middle East, and exports are currently blocked from leaving via the Strait of Hormuz. The region is also dependent on imports of bauxite and alumina. This creates a direct regional supply risk and has supported aluminum prices and regional premiums, though growth concerns are a countervailing force. Aluminum is outperforming the base metals complex due to this specific supply disruption risk, making it a metal to monitor closely. The Strait of Hormuz reopens quickly, or a significant global demand slowdown outweighs the supply risk.
Up Next
This Bloomberg Markets video, published March 27, 2026, features Phoenix Kalen, Amy Gower discussing INDA, BRN, GOLD, JJU. 4 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Phoenix Kalen, Amy Gower · Tickers: INDA, BRN, GOLD, JJU