Escalating Iran conflict pushes crude oil futures above $100, inflation alarm rings again

Insight Perspective: Prioritize allocation to money market funds and short-term bonds, prepare for volatility — Reflections on asset allocation amid the Iran crisis

The Middle East conflict enters its second week with both sides unwilling to compromise, escalating to high-intensity attacks

The Middle East conflict has now entered its second week, with the situation continuing to deteriorate. The initial airstrikes by the US and Israel targeted Iranian missile launchers, nuclear facilities, and senior decision-making bodies. In retaliation, Iran launched drone and ballistic missile attacks on US military bases in the Middle East and Israeli territory. Iran repeatedly declared the waters unsafe, leading to a near standstill of shipping through the Strait of Hormuz, causing a sharp drop in vessel traffic.As the conflict has evolved, targets have expanded to include key energy and civilian infrastructure such as oil facilities and desalination plants, directly threatening the energy supply chain. With no signs of peace talks, the conflict has escalated from military confrontation to energy attacks, gradually impacting the global landscape.

Military actions escalate to bombing oil fields, surpassing the rational blockade of the Strait of Hormuz

As military actions escalate to bombing oil fields, surpassing the rational blockade of the Strait of Hormuz, the conflict has reached a fever pitch. As a result, on Monday (March 9), WTI crude oil futures surged to $110 per barrel at the opening, officially breaking through the psychological barrier of $100. Brent crude also soared simultaneously, leading to a sharp rise in market risk premiums. After oil prices broke through $100, the global financial markets entered a dual-pressure zone of re-pricing inflation and slowing economic growth.

Capital shifts — Risk assets under pressure, money market funds see net inflows of $22.51 billion, reflecting strong risk aversion

Europe (an energy-importing region), which is most immediately affected by rising energy prices, faces severe imported inflationary pressures due to its heavy reliance on Middle Eastern supply chains; global investors reassess geopolitical risks, resulting in significant shifts in capital flows.

According to London Stock Exchange data, last week US stock funds saw net outflows of $21.92 billion, withNet outflow from growth stock funds$111.5 billion, indicating investors have lost confidence in technology and high-valuation stocks and are shifting toward money market funds (net inflow of $225.1 billion) and other safe-haven assets such as bonds,Strong risk aversion sentiment. The Asian markets are also experiencing capital outflows, especially in regions vulnerable to oil price fluctuations. Foreign capital has seen net selling, reflecting concerns that rising oil prices may cut into the profits of Asian companies.

Investment Insights: Inflation Risk Reassessment - Full activation of market defense mode

The hardest variable to analyze in geopolitical events is 'how long will the war last,' butwhat we can focus on should prioritize 'resilience'.Facing the current escalation of geopolitical risks, it is urgent to adopt a hedging strategy centered around money market funds and short-term bonds to address uncertainty. Allocating higher-rated quality bonds and defensive positions with shorter durations will better enhance downside risk protection for portfolios amid market volatility, contributing to long-term stable investment performance.

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