LIVE MARKETS-UBS urges investors to stick with stocks as Middle East tensions lift oil prices

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UBS URGES INVESTORS TO STICK WITH STOCKS AS MIDDLE EAST TENSIONS LIFT OIL PRICES

Investors should not retreat from equities but rather remain focused on long-term market fundamentals as escalating tensions in the Middle East have pushed oil prices to their highest levels in months, according to UBS analysts led by Ulrike Hoffmann-Burchardi.

Brent crude crossed above $112 a barrel for the first time since May and was on track for a third straight week of gains, bringing its advance this month to more than 9%, as renewed attacks across the region raised fears of further disruptions to global energy supplies.

The latest flare-up has added to geopolitical risks already heightened by the Russia-Ukraine conflict, fueling concerns that higher energy costs could complicate the outlook for inflation and monetary policy.

Still, UBS analysts said history suggests that geopolitical shocks are rarely a sufficient reason to stop investing. The benchmark S&P 500 .SPX has ended higher 12 months after the onset of a geopolitical crisis roughly three-quarters of the time since 1941. Furthermore, global oil markets are likely to adapt to any supply shocks, suggesting that rising prices are unlikely to hinder growth.

Against that backdrop, the analysts recommended maintaining exposure to energy-related assets as a hedge against supply-driven volatility and as a source of portfolio diversification.

"We think investors should consider broad commodities as a differentiated source of return, especially as rising power demand, AI infrastructure investment, electrification, and constrained supply are supportive of an upcycle," the analysts said. "We retain a constructive market outlook and believe investors should stay invested for further equity gains via broadly diversified exposure across sectors and regions."

(Chibuike Oguh)

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