In a recent Explore webinar, Candriam CIO Nicolas Forest, alongside Chief Economist Florence Pisani, Co-Global Head of Equity Management Johan Van der Biest and Head of Emerging Markets Equities Paulo Salazar, shared their views on the impact of the Strait of Hormuz closure, the general feeling of the markets and explored the trends to be aware of across equities. The discussion pointed to a market that has stayed resilient, but also to a world where inflation risks and supply disruption are rife, and valuation discipline still matters.
One month into the conflict, one word stands out: de-escalation. Markets have moved through weeks of escalation, ceasefires, blockades and reversals, yet risk assets remain close to their highs for the year: Equity markets have stayed firm; credit spreads remain tight. At first glance, markets appear to be looking through the geopolitical shock.
That resilience should not be mistaken for comfort everywhere. Long-dated bond yields remain high, and inflation expectations have moved up. This creates a striking contrast: risky assets are holding up well, while rates continue to reflect a more difficult inflation backdrop. That matters because higher inflation makes life more complicated for central banks and governments alike. Monetary policy becomes harder to steer. Budgetary policy becomes more constrained.
The earnings picture helps explain why equity markets have remained resilient. Unlike the sharp drop in earnings expectations that followed US President, Donald Trump’s, tariff announcements on “Liberation Day”, this conflict has not triggered the same collapse in forecasts. Energy, materials and parts of technology have continued to support earnings expectations, helping markets absorb the shock.
The key lesson is to resist being pulled from headline to headline. In fast-moving markets, long-term convictions matter more than noise. That is why the focus remains on the areas where structural trends still look intact, and where markets may be underestimating the durability of earnings.
The global economy has proved more resilient than expected. Labour markets in the US and Europe remain solid, and recent data suggest growth carried into the first quarter. Institutions such as the IMF and OECD have only marginally revised down their forecasts. That resilience, however, depends on one key assumption: disruption in the Strait of Hormuz is short-lived.
The Strait is not just an oil route. Around 20% of global oil and gas flows through it[1], but the impact extends far beyond energy. Energy prices feed into many industrial inputs and food prices. Fertilizers, sulphur and helium are affected. If disruptions persist, this will trigger broader supply chain tensions. Early signs of strain are already visible in jet but also bunker fuel markets.
The key question is not whether traffic will normalise, but how quickly. Strategic reserves and rerouting can provide temporary relief, but they cannot fully replace normal flows. A short disruption is manageable. A prolonged one would push inflation higher, weaken confidence and materially impact growth.
A slow normalisation scenario appears more likely than a rapid recovery. Political uncertainty remains high, and even after any agreement, normalisation will take time. The global economy has not broken, but it is more exposed to a persistent supply shock.
The case for technology remains constructive, but the focus is shifting from pure momentum to selectivity. Strong earnings growth continues to support the sector, helped in part by ongoing investment in AI infrastructure. That investment is now feeding through to revenues across the ecosystem, moving the story beyond expectations to tangible results.
At the same time, markets have become more nuanced. Valuations have normalised in parts of the sector, particularly in software, where recent underperformance has created more interesting entry points. This opens opportunities, but not across the board. Some segments face genuine disruption from AI, while others are positioned to benefit from it.
AI remains an important driver, but it is not the only one. Adoption is still at an early stage, suggesting further upside over time. However, constraints such as access to electricity, water and financing could shape the pace of expansion and need to be monitored closely.
The outlook therefore calls for greater discrimination. Areas such as cybersecurity stand out, where demand remains strong and AI acts as an enabler rather than a threat. The opportunity in equities is still compelling, but it is no longer about broad exposure. It is about identifying where earnings remain resilient and where structural growth can be sustained.
If a major oil shock is avoided, the medium-term consequence of this conflict may be a weaker dollar. That would mark an important shift for emerging markets. Central banks are diversifying reserves, trade is increasingly conducted in other currencies and China is positioning itself as a more reliable partner. In that environment, emerging market equities appear well placed.
Valuations strengthen the case. Emerging market equities remain compelling relative to developed markets, while portfolio inflows suggest investors are starting to respond. The energy backdrop also matters. Energy security has become more strategic, supporting both traditional energy producers and renewables, whose competitiveness improves when oil prices stay elevated.
Technology is another key driver. Emerging markets are no longer a single-country story. The opportunity set is broader, spanning Taiwan, Korea and India, with technology now the largest sector. AI investment by US leaders is already feeding into earnings growth across Asian tech companies, many of which still trade at a discount to US peers.
China requires a more selective approach. Growth has slowed and the broader backdrop remains uneven, but opportunities persist. Sectors such as semiconductors, robotics and advanced manufacturing continue to show strong momentum. Across emerging markets equities, we believe, the opportunity lies less in broad exposure and more in careful stock selection.
[1] Source: U.S. Energy Information Administration (EIA), as of 03/03/2026
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