Iran Conflict: oversold Swiss equity market
Recent geopolitical tensions and movements in the energy and interest rate markets have increased volatility in financial markets and led to a significant correction in Swiss equities. Against this backdrop, we are making targeted reallocations in our portfolios, without calling into question our fundamentally constructive base case of an imminent market recovery.
The oil price is holding at around USD 100 and the Strait of Hormuz remains closed; nervousness remains high.
Markets are pricing in further interest rate hikes in Europe (incl. SNB) – in our view exaggerated.
We are increasing Swiss equities as this market has corrected too sharply, and we are reducing our exposure to the hitherto robust US equity market and thereby also the US dollar quota.
What has changed?
Hostilities between Iran and the USA are continuing with the laying of mines and the attack on Iran’s oil hub Kharg. The International Energy Agency has announced the release of 400 million barrels of oil, which roughly corresponds to the volume for a 20‑day blockade. In the oil market, with prices at around USD 100 per barrel, concerns predominate and are moving in the direction of our risk scenario of a persistent shortage.
This is now impacting inflation expectations (USA from 2.2% to 4.7% in one year). Accordingly, the expected rate cuts by the US Fed have been priced out, and the market is now even expecting interest rate hikes in Europe. At the same time, fundamental inflation drivers in the USA such as wage growth and rents are declining. Already this week, when the interest rate policies of many central banks are announced, more qualifying assessments are to be expected.
The correction in Swiss equities has been particularly pronounced in a global comparison. In addition to the weak euro, the disappointing study results from Roche (-15%) also played a major role. Independently of the war with Iran, the news flow on private credit has also deteriorated. This is increasingly weighing on the liquid credit markets: in the US insurance sector, the premium over government bonds has risen from 83 to 109 basis points, tightening financial conditions in the US.
Overall, however, the economic context remains sufficiently robust, thanks to moderate indebtedness of companies and households, to cope with these developments.
What adjustments are we making?
We are increasing our position in Swiss equities. The correction of an interim -9% is pronounced both in a global and historical comparison. Cyclical companies in the construction, consumer and insurance sectors have come under particular pressure. The valuation is now at around 17 times the expected 2027 earnings. Two of the three index heavyweights are proving defensively robust, and the level of around 17,400 points in the SPI should provide important support.
In return, we are reducing our US equity quota. The US market has so far been relatively unaffected, with around -3.5% in March, but could increasingly come under pressure in view of weaker economic data (particularly in the labour market and for credit card payments) as well as tighter financial conditions. At the same time, this reduces our USD exposure, after the dollar has gained around 4% against the Swiss franc since its low at the end of January. Investor positioning has turned from clearly “short” to “long”; if the situation eases, the longer‑term depreciation trend of the dollar is likely to continue.
We are maintaining our fundamentally constructive overall scenario – a recovery within 3–4 weeks – even if the turmoil in the Middle East lasts longer than initially expected.
How is our investment strategy performing?
The performance of our mixed portfolios compared with the end of the previous year is roughly 0% in both absolute and relative terms. The Iran conflict has thus largely undone the good start to the year. Tactically, the overweight in emerging markets, small caps and basic materials has weighed on performance in March, while the overweight in US technology stocks and in AUD has contributed positively to performance.
Swiss equities near support level after correction
How are the markets reacting?
|
Market
|
Price Change (since 27 Feb) |
|
Market
|
Price Change (since 27 Feb) |
|---|---|---|---|---|---|
Energy |
Oil (Brent) |
44.6% |
Rel. Losers |
Korean Equities (16.3.) |
-11.1% |
Natural Gas (TTF) |
56.8% |
|
Spanish Equities |
-7.1% |
|
Metals |
Gold |
-4.7% |
|
Basic Materials Equities |
-11.3% |
Currencies |
USD / CHF |
2.8% |
|
Italian Bonds 10y |
-3.7% |
USD / EUR |
3.3% |
|
USD / ZAR (16.3.) |
-2.6% |
|
Equities |
MSCI EM Future |
-8.2% |
|
|
|
USA Future |
-3.6% |
Rel. Winners |
Global Energy Equities |
+3.8% |
|
|
Europe Future |
-6.7% |
US Nasdaq Equities |
-2.5% |
|
|
Switzerland Future |
-8.2% |
|
Chinese Equitites (16.3.) |
-0.8% |
Interest Rates |
US 10 Year |
+32.4 bps |
|
CDX Inv. Grade |
+6 bps |
|
EUR 10 Year |
+34 bps |
|
|
|
Source: Bloomberg, Zürcher Kantonalbank as of 16.03.2026 / 08:15
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