FLASH

Oil price crisis and market volatility – Key opinion changes
Guy Ertz, Deputy Global Chief Investment Officer, Stephan Kemper, Chief Investment Strategist, BNP Paribas Wealth Management, Patrick Casselman, Senior Investment Strategist PRB, and Alain Gerard, Senior Investment Advisor
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Key Messages

1. Given the events of the past week, we have decided to integrate the risk of a prolonged Iranian conflict into our recommended asset allocation.

2. With crude oil prices breaching USD 100/barrel as of Monday 9 March, we will enter the realm of oil demand destruction if these elevated oil and gas prices persist over the next few months, as was the case in 2022. Uncertainty over this conflict remains very high, reflected in the jump in implied volatility on oil, stocks and FX markets over the past week.

3. Such a stagflationary economic scenario leads us to take a more prudent view on risk assets, notably both global equities, the high yield credit as well as emerging bond markets.

4. We downgrade Corporate High Yield to Negative and Emerging Market bonds to Neutral. We downgrade Equities to Neutral (we have maintained a Positive stance since late 2022). Within regions, we downgrade Japan and Emerging Markets to Neutral (but more cautious on Asia). We downgrade Europe to Negative. Sector-wise, US Financials are downgraded to Negative and Europe Financials to Neutral.

5. We see less potential for dollar weakness and change our 3-month target to USD 1.14 and also revise our 12-month target to USD 1.20 (value of one euro).

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