Safe-haven currencies like the dollar, yen, and gold are predicted to surge while equity sentiment may deteriorate due to supply chain disruptions amidst escalating US-Iran tensions, as per a report by DBS Bank. The report highlights potential widening spreads of sovereign and corporate bonds and anticipates a stable monetary policy in the near future. Taimur Baig, Chief Economist at DBS Bank, expressed concerns over possible disruptions in shipping, increased insurance costs, and elevated energy prices due to Iran’s ability to deploy mines and asymmetric attacks in the Strait of Hormuz.
A prolonged closure of the Strait of Hormuz could significantly disrupt global oil trade, affecting even the spare oil capacity from Gulf producers, according to the bank. In a full-blown crisis scenario, the report suggests that crude oil prices could skyrocket to $100–150 per barrel, leading to inflation concerns, limiting the Fed’s rate-cutting options, and heightening the risk of a global recession. Hou Wey Fook, Chief Investment Officer at DBS Bank, mentioned a potential flight to safe-haven assets favoring treasuries and gold over silver as a risk diversifier due to silver’s heavy reliance on industrial demand.
DBS Bank also cautioned about the risk of the US getting entangled in another prolonged conflict, emphasizing the lack of strategic clarity. The bank’s experts foresee a scenario where strategic stocks in the US may not suffice to counter the potential damages in case of a full blockage of the Strait of Hormuz.
