Global markets have become more volatile following the escalation of the Iran conflict, with energy supply disruptions emerging as the primary macro risk. The closure of the Strait of Hormuz and damage to oil infrastructure have pushed crude prices sharply higher, raising global inflation and stagflation concerns and potentially delaying expected rate cuts by major central banks.

Within equities, China and Hong Kong markets have shown relative resilience, supported by attractive valuations, improving economic data, and strong Southbound inflows. China A-shares have also remained comparatively stable due to domestic policy support, a gradually strengthening RMB, and limited sensitivity to global liquidity conditions.

Elsewhere in Asia, Taiwan and Korea have experienced heightened volatility after leading earlier gains, as profit-taking and risk-off sentiment emerged. Nevertheless, structural demand for AI hardware remains intact, supporting medium-term fundamentals in the technology supply chain. Energy-import-dependent markets such as India, the Philippines, and Vietnam appear more vulnerable to sustained oil price shocks.

In fixed income, Asian investment-grade and high-yield spreads remain tight despite rising duration risks and potential spillovers from global credit markets. Meanwhile, higher oil prices benefit some Latin American exporters, while gold has remained resilient as a geopolitical hedge. In this environment, diversified multi-asset strategies with a stronger focus on income may help manage volatility and enhance portfolio stability.

Source: J.P. Morgan, MSCI, Morningstar, Data as of 28 February 2026

China / Hong Kong Equities

• Volatility in the market has surged due to the start of the Iran War. The war has escalated with strong stances from the US, Israel, and Iran.
• The key impact on the market and global economy is energy disruption.  With the closure of the Strait of Hormuz going into the second week and many Gulf countries running out of oil storage, together with the attack on some of the oil facilities, oil production will be cut by 4-8 million barrels/day, which is around 4-8% of daily global oil demand.
• This caused oil prices to surge from USD 73 pre-war to more than USD 90 (the highest has reached USD 120).   LNG supply is even more disrupted, and prices have already more than doubled in some countries.
• Inflation / stagflation risk has increased globally.  Although the US is mulling to allow Russian oil to fill in the gap and the G7 is discussing releasing the strategic oil reserve, these moves will take some time, and high energy prices will stay for some time.
• This will likely delay interest rate cuts in the US and globally by a quarter, depending on the duration of the supply disruption and the impact on inflation.
• The NPC meeting in China has set the GDP growth target this year to be 4.5-5%, and other economic targets are in line with market expectations. Exports in February and inflation data are much better than expected, which is supportive.
• As the China/ Hong Kong equity market has been lagging other Asian markets YTD, together with the strong Southbound flow to buy on dip, while valuation is relatively appealing, the downside risk due to the war is less, and we have seen that the market is more resilient comparatively.

China A-Shares

• RMB continues its strengthening as PBOC allows a gradual appreciation of the RMB to aid in supporting domestic demand, while exports turn out to be more resilient than expected during the first two months.
• Moreover, the China A-Share market is usually less impacted by global liquidity and sentiment; it is much more resilient than other Asian markets during the high volatility environment due to war.
• Although China relies heavily on the Middle East for energy imports, it has strong reserves to protect against short-term disruption.  Also, the potential meeting between Xi and Trump in April should provide a positive message and support to the market.

Asia ex-Japan Equities

• There is huge volatility in the Asian equity market since the Iran war, especially in Taiwan, and Korea markets, which had led the rally in the first two months.  They are more fragile to the reversal and profit taking.
• Also, India and ASEAN countries, which are heavy oil importers, have been hit by concerns about high oil prices, which may cause inflation and delay the interest rate cut.
• On the other hand, AI demand is not impacted by the war, and increasing defense spending going forward will only be an additional demand for AI.  Therefore, although there is significant volatility in the Taiwan and Korea markets due to profit taking and risk-off sentiment, fundamentals have not changed, especially for the technology hardware sector.  With the correction and calm down of the hype and valuation, it is indeed a healthy development for the markets.
• Energy-importing heavy countries such as India, the Philippines, and Vietnam are the most vulnerable to the energy supply disruption. Strong USD due to the risk-off mode also put heavier pressure on their interest rate cut plan and funding cost.

Emerging Market ex-Asia Equities

• The surge in oil prices due to the Iran war is somehow beneficial to the oil-exporting countries in Latin America and Russia.  On the other hand, they are also impacted by the risk-off sentiment and profit-taking due to their relatively high valuation.

Japanese Equities

• Japan is a heavy importer of energy from the Middle East, and the current disruption is impacting the overall economy as the government is taking some measures to limit usage and considering capping fuel prices. This adds to the original inflation problem in Japan.
• Together with the wage negotiation season starting in March, most companies are expected to increase wages to keep talent, given the tight labor market.
• BOJ needs to hike interest rates to combat inflation.  However, with PM Takaichi expressed concern on interest rate hike and given market volatility, there is still uncertainty in the interest rate movement.  Therefore, under the current risk-off environment, JPY also depreciates against USD and does not act as the usual safe-haven currency.
• On the fundamental side, earnings are strong, and given fiscal policy support, the market remains solid.  However, due to relatively high valuation, the market will be expected to be volatile during the current environment.

Asia Investment Grade Bonds

• Credit spreads of Asia investment-grade bonds remain tight and are now even tighter than the US investment-grade bond spreads.
• Treasury yields are rising, given the market concern of inflation due to higher oil prices and heavier fiscal deficit due to the war.
• Duration risk is high while the credit spreads need to be closely monitored, although demand for Asia investment-grade bonds remains strong.

Asia High Yield Bonds

• Spreads of Asia high-yield continue to remain very tight at levels way below average.  As new supply remains subdue, investors are chasing for the same set of names in Asian high yield bonds as the search for yield continues.
• If risk-off sentiment and liquidity tightening intensify in the market due to the prolonged war, the spread-widening risk will become higher.
• Also, the impact on default and spread widening in the US high yield bonds due to the cracks in private credit and bank loans also needs to be closely watched.  Although the fundamentals are stronger in Asia, there could be a spillover impact.

Emerging Market Debt

• Spreads remain tight, but investor demand remains very strong.  Higher oil prices are supportive to Latin America.

Gold

• Gold prices remained resilient during this wartime.  The strengthening of the USD due to risk-off sentiment has not impacted the gold price much vs. other precious metals, which have shown Gold remains as a good hedge to geopolitical risk.
• Moreover, central banks continue to buy Gold to diversify away from US Treasuries.  Institutional investors’ gold positioning remains low and will likely increase over time.

Multi-Asset

• A multi-asset strategy offers lower volatility compared to traditional single-asset or balanced portfolios. However, the correlation between risk assets, such as equities, credits, and commodities, has recently increased dramatically. In an uncertain environment, income becomes an essential source of return for investors.

Source: Bloomberg, Data as of 28 February 2026.

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