Report Summary

• The Iran conflict exposed pre-existing market fragilities, including elevated equity valuations, narrow credit risk premia, and concerns over AI investment sustainability.
• A sharp crude oil spike to US\$119/barrel has reinforced late-cycle risks, raising fears of a growth-inflation trade-off and triggering volatility across markets.
• Despite investor temptation to “buy the dip,” the report advises caution due to weak macro conditions, sticky inflation, and oil supply uncertainties.
• Large, quality companies with strong balance sheets are favored for resilience, while small, highly leveraged firms appear more vulnerable in a downside scenario.
• Asia’s dependence on oil via the Strait of Hormuz makes China pivotal economically, suggesting that US/China cooperation is important to resolving the crisis.
• A sustained rise in oil prices or a stronger US dollar could mark the end of the market cycle and liquidity peak; full capitulation in risk assets has likely not occurred yet.