Amidst the airstrikes in Iran, the financial giant BlackRock continues to maintain a position of underweight long-term U.S. Treasuries, citing an energy-led supply chain shock.
In a recent commentary by analysts at BlackRock Investment Institute, it is noted that oil futures pricing indicates potential disruptions lasting for weeks rather than months.
“The current situation contributes to inflation risk in a market influenced by supply dynamics. Despite being considered a safe haven, long-term Treasury yields have risen. While there is a possibility of a stagflationary shock, market pricing suggests otherwise. We maintain our underweight position in long-term Treasuries and prefer U.S. stocks.”
The analysts observe that international equities were surpassing U.S. stocks until the U.S. and Israeli airstrikes, which caused a reversal in performance. Regions reliant on energy imports experienced a decline in equities following the conflict outbreak.
However, the analysts suggest that economic and political pressures may help mitigate the situation in Iran.
“If U.S. naval escorts and shipping insurance prove effective in preventing a prolonged closure of the Strait of Hormuz, disruptions could potentially ease. Overall, we may see a short-term supply constraint with varying regional impacts.”
BlackRock also maintains an overweight position in Japanese equities due to factors such as strong nominal growth and corporate governance reforms.
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