India, Southeast Asia Brace for Impact as Iran War Rages | Insight with Haslinda Amin 02/13/2026
Speakers
Summary
- Brent crude has breached $100 per barrel due to the effective closure of the Strait of Hormuz, sparking global stagflation fears and delaying expected Fed rate cuts.
- AI infrastructure requires massive capital, with hyperscalers projected to spend $750 billion in 2026 and over $900 billion in 2027, driving $1 trillion in US investment-grade debt issuance.
- Private credit and BDCs face severe risks due to a 25-26% exposure to legacy software companies, which are highly vulnerable to AI disruption and face a refinancing wall in 2027-2028.
- India is disproportionately impacted by the energy shock, facing critical shortages of commercial LPG that are forcing restaurant closures, alongside a record-low Rupee and foreign capital outflows.
- A drone strike on a Qatar LNG plant has knocked out roughly one-third of the global helium supply, creating a severe tail risk for semiconductor foundries that rely on helium for wafer cooling.
Trade Ideas
You are seeing a bid for US dollar. Most of the oil is traded in US dollars. So petrodollar effect is helping the US dollar. As oil prices spike above $100 and geopolitical panic sets in, global capital flees to the safety and liquidity of the US Dollar, while the necessity to buy expensive oil further drives structural demand for USD. The US Dollar is the primary safe haven asset in this specific geopolitical energy shock, outperforming even gold due to delayed rate cuts. A sudden diplomatic resolution to the Iran conflict would rapidly deflate oil prices and reduce the safe-haven premium on the dollar.
China wasn't expensive when this war happened... the strategy of having diversified energy sources has helped... even laggards like Tencent have started retracing some of their underperformance. While the rest of the world struggles with $100 oil and stagflation, China's cheap equity valuations, massive EV/green energy dominance, and strategic oil buffers insulate its tech and consumer sectors from the worst of the macro shock. Chinese tech and green energy equities offer a rare combination of cheap valuation and fundamental resilience against Middle East energy disruptions. Escalating US-China trade tariffs or secondary sanctions related to the geopolitical conflict could override the valuation and energy-buffer advantages.
BDC exposure to software sector is about 26%... originated in 2021... more like a B minus or below type of credit... market is not confronted with how much of disruption is going to be there. Business Development Companies heavily financed lower-tier, highly leveraged software companies at the peak of the 2021 market. As AI disrupts these legacy software business models, these companies will struggle to service debt or refinance in 2027, leading to a spike in private credit defaults. The risk premium in private credit is too narrow and does not accurately price in the existential threat AI poses to the underlying software borrowers that make up a quarter of BDC portfolios. If AI disruption takes longer to materialize than expected, these BDCs will continue to collect high interest payments, punishing short sellers with high dividend yields.
The market has to deal with a massive amount of supply, $1 trillion of net issuance in the US investment grade market this year... we expect the markets to widen something in the 15 basis point range. Hyperscalers need to fund an unprecedented $750 billion to $900 billion in AI data center CapEx. They will tap the investment-grade corporate bond market to do this, and this massive flood of new bond supply will drive prices down and yields up. The sheer volume of incoming debt issuance required to build AI infrastructure will mechanically widen credit spreads and depress the prices of existing investment-grade corporate bonds. If AI CapEx plans are drastically scaled back due to power constraints or hardware shortages, the anticipated flood of bond supply will not materialize, supporting IG bond prices.
We're in essence, short duration... we don't think any more that there are going to likely be interest rate cuts. A 30% spike in oil prices acts as a tax on growth while simultaneously pushing headline inflation up by roughly 25 to 30 basis points. This stagflationary environment forces the Fed to abandon rate cuts, which destroys the value of long-duration bonds. Short-term Treasury bills provide a safe, high yield without the duration risk associated with sticky inflation and delayed central bank easing. If the energy shock causes a severe, immediate recession that destroys demand, the Fed may be forced to cut rates anyway, causing long-duration bonds to outperform cash.
India is well known as dependent on oil. Of course, India is probably less known, but also dependent on natural gas and fertilizer as well... harder hit than other countries. Because India imports the vast majority of its energy through the Strait of Hormuz, the blockade directly cripples its economy, causing the Rupee to hit record lows, forcing commercial gas rationing, and triggering foreign capital flight. India's structural reliance on imported Middle Eastern energy makes its equity markets highly vulnerable to the ongoing geopolitical blockade. Diplomatic negotiations securing safe passage for Indian tankers could rapidly alleviate the energy shortage, sparking a massive relief rally in Indian equities.
A drone strike on an LNG plant in Qatar knocked out output... Qatar makes up for the global output of helium... there's no viable substitute for helium in the semiconductor process. Helium is a mandatory cooling agent for etching silicon wafers. If the Qatar outage lasts for several months, global foundries will burn through their reserves and be forced to halt or severely restrict chip production. The semiconductor supply chain faces a critical, under-the-radar tail risk. If helium reserves run dry, even the largest foundries will suffer severe production bottlenecks. Foundries may have larger strategic stockpiles of helium than publicly known, or alternative refining capacity in Russia/US could be brought online faster than anticipated.
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