BlackRock, the financial giant, remains underweight on long-term U.S. Treasuries despite airstrikes against Iran that are causing a supply-chain shock based on energy.
Analysts at BlackRock Investment Institute have released a commentary in which they say that oil futures prices suggest “that disruptions could last weeks and not months.”
The episode increases inflation risks in an environment shaped by factors of supply. The long-term Treasury rates have risen, showing that they are no longer a safe haven. As the market prices indicate, there is a chance of a shock stagflation, but this risk does not exist. “We remain underweight Treasuries on the long term and prefer US stocks.”
Analysts note that until US and Israeli strikes, international stocks outperformed US shares. After the war, however, equities in regions that depend on imports of energy began to suffer.
However, they do claim that political and economic pressures can help to contain the war in Iran.
The disruptions may ease in the interim if US ship insurance and naval escorts prove to be effective at preventing the Strait of Hormuz from being closed for a long time. All of this will lead to a temporary supply shortage with regionally disparate effects.
BlackRock continues to overweight Japanese stocks due to the “strong nominal GDP and corporate governance reforms.”
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The post “Risk of Stagflationary shock”: BlackRock analysts stay underweight on long-term U.S. Treasuries amidst conflict in Middle East could be updated as new information becomes available.
