Standard Chartered: US Inflation-Protected Securities "Best Hedge" Against Middle East Risks

 Standard Chartered has recommended that investors maintain exposure to U.S. Treasury Inflation-Protected Securities (TIPS), describing them as one of the most effective hedges against escalating geopolitical risks in the Middle East, while arguing that any spike in crude oil prices above $90 per barrel is unlikely to be sustained.

According to a recent research report obtained by Al Mal, the bank said recent developments, including attacks on commercial shipping transiting the Strait of Hormuz and U.S. military strikes targeting Iran, have heightened geopolitical uncertainty and pushed oil prices higher.

Despite the renewed tensions, Standard Chartered does not expect crude prices to remain above the $90-per-barrel threshold for an extended period. The bank forecasts oil will continue trading within a $70–$90 per barrel range, even if regional hostilities intensify.

The report argues that Washington has a strong incentive to prevent a prolonged oil price shock, as elevated energy costs could undermine U.S. economic growth ahead of the country's upcoming midterm elections.

While the bank acknowledged the possibility of further escalation should the U.S. administration proceed with additional military actions, it said policymakers are equally motivated to contain the conflict because of the economic and political consequences associated with sharply higher oil prices.

Standard Chartered also said the recent rise in bond yields presents an attractive opportunity for investors to lock in higher returns, noting that the peak of the Federal Reserve's monetary tightening cycle is likely behind it.

Within fixed income, the bank continues to favor credit instruments over developed-market government bonds, while recommending increased exposure to U.S. dollar-denominated emerging-market sovereign debt.

It also maintains a preference for shorter-duration bonds, arguing they provide greater protection against potential volatility in yields driven by inflation risks or changing fiscal conditions.

On equities, the bank noted that gains across Asian markets excluding Japan have been concentrated primarily in South Korea and Taiwan, supported by strong performance in semiconductor companies. In contrast, equity markets in China and India have lagged broader regional benchmarks this year.

Looking ahead, Standard Chartered expects the market rally to broaden, benefiting both China and India as investor appetite expands beyond technology-heavy markets. The bank also anticipates a weaker U.S. dollar, a development it believes would support capital inflows into Asian equities.

The report reaffirmed its overweight recommendation on both Chinese and Indian equities, while highlighting the Hang Seng Tech Index as its preferred vehicle for capturing further gains in Asia's technology sector.

Standard Chartered concluded that inflation-protected securities remain a compelling defensive allocation for investors seeking to navigate heightened geopolitical uncertainty while preserving portfolio resilience against potential inflation shocks.