Hormuz risk reopens inflation trade

From AB Capital's The Opening Bell: Three Moves

Event

United States strikes on Iran resumed after Trump declared the June 17 memorandum of understanding (MoU) "over," renewing concerns over Strait of Hormuz shipping. Brent rose 5.2% to US$78.02, briefly moving above US$80 in Asia, while US Treasury (UST) yields climbed as markets repriced inflation risk.

View

In our view, this partly reverses the recent macro relief from lower oil and reduced supply-shock premium. The Philippines remains highly exposed through fuel imports, foreign exchange (FX) pressure, transport costs, and second-round effects, especially with inflation still above target and core already sticky.

Catalyst

Key sensitivities are Hormuz tanker flows, Iranian retaliation, Brent levels, and peso reaction. If Brent stays below US$80, the inflation impact may be manageable. Above US$90, Bangko Sentral ng Pilipinas (BSP) 50bp risk returns; above US$100, our prolonged-stress inflation scenario becomes more relevant.

Action

We think investors should trim broad relief trades and keep selective risk only. Favor defensives with pass-through, utilities, telcos, and companies with pricing power. Stay cautious on consumers, autos, property, REITs, and high-duration names until oil, peso, and BSP expectations stabilize.

Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.