Link
Video recorded on 10 April 2026
The energy shock triggered by tensions around the Strait of Hormuz is weighing heavily on oil and gas prices, undermining global growth prospects looking ahead to 2026. Against this backdrop of ongoing geopolitical instability, how should investors navigate financial markets? Insights from Sebastian Paris Horvitz, Head of Research at LBP AM, in our regular market update “Market Views”.
A first step toward peace? The ceasefire in the war initiated by the United States and Israel against Iran was greeted with relief by financial markets. Nevertheless, the conflict has triggered a historic shock to energy markets, marked in particular by the closure of the Strait of Hormuz, through which nearly 20% of global oil production transits.
As a result, oil prices surged, with crude reaching close to USD 100 per barrel in March. While the ceasefire announcement led to a modest pullback in oil and gas prices, they remain elevated, as do uncertainty levels—further heightened by the failure of diplomatic negotiations.
This shock has disrupted what were initially relatively favourable growth prospects for the global economy in 2026. These prospects were largely supported by substantial fiscal stimulus measures, notably in the United States, Germany and Japan, alongside monetary policies that had become more neutral, or even accommodative.
In addition, the negative effects of the U.S. tariff shock imposed in 2025—particularly on business and consumer confidence—were beginning to fade.
In the short term, the energy shock is clearly growth-negative and exerts upward pressure on inflation. Its overall impact will depend critically on its duration. More adverse scenarios cannot be ruled out, especially should the conflict persist.
That said, we continue to view a scenario of lasting de-escalation as the most likely outcome. For different reasons, both the U.S. and Iran share a common interest in exiting the crisis. For President Trump, the conflict is economically and politically costly ahead of the midterm legislative elections. For Iran’s new leadership, a return to stability is also a key priority.
Against this backdrop, should a gradual resolution emerge by the end of the month, the forces that supported economic activity at the start of the year could once again become dominant. The reopening of the Strait of Hormuz would also allow energy prices to converge back toward pre-conflict levels.
In the very short term, caution remains warranted given the persistence of geopolitical uncertainty. Nevertheless, our central scenario remains constructive for markets: a gradual resolution of the crisis should help restore confidence and support a renewed appetite for risk.
We believe that the inflationary impact of higher energy prices should dissipate relatively quickly, particularly as growth may temporarily slow before rebounding. This environment should encourage central banks to maintain broadly neutral monetary policies. In particular, we do not anticipate a significant tightening of ECB monetary policy.
In this context, and against market expectations that are pricing in greater monetary restraint, our more balanced assessment leads us to overweight sovereign bonds, particularly short- and intermediate-term maturities in the euro area.
As regards corporate bonds, we maintain a relatively neutral stance. The asset class has proven fairly resilient throughout the crisis, which limits its rebound potential today—especially in riskier segments, where risk premia remain low. We therefore favour high-quality credit and remain highly selective in our exposure to High Yield.
Finally, we believe that an overweight position in equities remains justified. While downward revisions to earnings forecasts are possible, the anticipated recovery in growth over the remainder of the year should support this asset class. U.S. equities, whose valuations have become slightly less demanding, could experience a more pronounced rebound.
China, benefiting from greater economic resilience to the energy shock, is also expected to perform well. European markets, which have lagged somewhat, should likewise regain a more favourable momentum. By contrast, we maintain a more cautious stance on Japan, notably due to the risk of a sharper currency appreciation.