How the Iranian Conflict Has Reshaped Fixed Income
In this video Dylan Bourke and Kris Bernie, portfolio managers at Kapstream Capital, provide an update on the impact of the Iranian conflict and the prolonged closure of the Strait of Hormuz on global fixed income markets and the macroeconomic landscape. They explain how the disruption has driven oil prices above $100 a barrel, fuelling inflation and prompting central banks in major economies to reconsider their rate hike trajectories.
The discussion covers the initial equity market reaction, the sustained rise in bond yields, and the diverging paths of risk and rates markets. They also discuss the influence of the US AI investment boom, noting its dual role in supporting equity markets and contributing to inflationary pressures. They emphasise the current appeal of short-dated global investment grade fixed income strategies, given heightened uncertainty, and discuss the shifting correlation between rates and equities, which challenges traditional portfolio construction approaches.
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