Ship Attacks Reignite US-Iran War Risks | Insight with Haslinda Amin 05/05/2026

Key Concepts

• Geopolitical Risk: Escalating conflict between the US and Iran in the Strait of Hormuz, impacting global oil supply and market sentiment.
• Energy Shock: The impact of Brent crude prices (hovering near $114) on global inflation and central bank policy.
• AI-Driven Market Narrative: The resilience of the tech sector (semiconductors, memory, and hyperscalers) despite broader macroeconomic and geopolitical headwinds.
• Asset-Heavy vs. Asset-Light: A shift in investment philosophy where infrastructure (compute, data, power) is becoming the new "scarce asset."
• Indian Electoral Dynamics: The BJP’s expansion in state elections (West Bengal) versus the rise of new political actors (movie star Vijay in Tamil Nadu).
• Barbell Strategy: An investment approach balancing high-growth AI-related equities with liquidity management to mitigate volatility.

1. Middle East Conflict and Global Markets

The primary driver of current market volatility is the renewed armed hostility between the US and Iran.

• The Strait of Hormuz: The US launched "Project Freedom" to forcefully secure the passage of commercial vessels. Despite Iranian drone and missile attacks, US destroyers successfully navigated the strait.
• Regional Impact: The UAE reported significant damage at the Fujira port due to drone strikes and intercepted 15 projectiles. Diplomatic channels (GCC, Saudi Arabia) are calling for de-escalation, but the situation remains "fluid."
• Market Reaction: While oil prices remain elevated, stocks and bonds are reacting differently. Bonds are pricing in the energy shock (10-year yields breaching 4.4%), while equity markets—particularly in Asia—are showing resilience due to strong earnings in the AI hardware sector.

2. Investment Strategy: The Shift to "Asset-Heavy"

John Zito (Apollo) argues that the investment regime has fundamentally changed due to the AI revolution.

• The New Rubric: Success is no longer defined by "asset-light" margins. Instead, the focus has shifted to "asset-heavy" infrastructure—specifically compute, data quality, and power.
• Case Study (Intel): Zito highlighted the financing of Intel’s fabrication plants as a prime example. While initially criticized as "dumb money," the investment proved prescient as the world realized the necessity of physical infrastructure for AI.
• Private Credit: Apollo views private credit as a safer, more strategic avenue for financing the massive capital expenditure (capex) required for the AI buildout, moving away from traditional LBO (Leveraged Buyout) loans.

3. Indian Politics and Policy

Rahul Verma (Shiv Nadar University) analyzed the recent state election results:

• BJP Dominance: The BJP’s victory in West Bengal marks a historic expansion of their influence in Eastern India. This win provides Prime Minister Modi with increased domestic authority, potentially allowing him to pursue contentious constitutional reforms, such as redrawing constituency boundaries.
• The "Movie Star" Factor: The victory of actor Vijay in Tamil Nadu is described as a "shock" that defies traditional political science models, as he lacked a long-standing party structure or movement.
• Policy Outlook: Despite the political win, the government’s immediate priority remains the economic fallout of the energy crisis. Constitutional reforms are unlikely to be pushed in the next 4–6 months due to the need for a 3/4 majority in Parliament.

4. Indian Equities and Economic Vulnerability

Shibani Kurin (Kotak Mahindra) provided a technical outlook on Indian markets:

• Valuation: Indian market valuations have corrected to levels slightly below long-term averages, making them more "reasonable" compared to the broader Emerging Market (EM) pack.
• Headwinds: India is highly sensitive to oil prices. A $10 increase in oil prices widens the current account deficit by approximately 40 basis points.
• Support Mechanisms: Domestic Institutional Investors (DIIs) and Systematic Investment Plan (SIP) flows are acting as a floor for the market, offsetting the "brutal" selling by Foreign Institutional Investors (FIIs).

Notable Quotes

• John Zito (Apollo): "Maybe what before was the rubric for success—it was all about code being the scarce asset—right now it's compute. It's data quality. It's your talent."
• Rahul Verma (Shiv Nadar University): "The 2024 setback [for the BJP] was perhaps more because of overconfidence and complacency... but with every victory, I think they have been gaining more and more strength."
• Marcela Chow (JP Morgan): "Investors within Asia... seem to have looked past the geopolitical noises and economic worries and actually focus more on the fundamentals and have been offset by this AI story."

Synthesis

The global landscape is currently defined by a tension between geopolitical fragility (Middle East conflict, energy supply shocks) and technological optimism (the AI capex cycle). While the energy crisis threatens to keep inflation sticky and pressure central banks, the "AI narrative" continues to provide a buffer for equity markets. In India, political consolidation under the BJP offers a stable domestic environment, but the country remains highly vulnerable to external energy shocks, necessitating a cautious, liquidity-focused investment approach (barbell strategy) until the Middle East situation stabilizes.