[ANALYSIS] With conflict in the Middle East, is it a good time to buy stocks?

2026-03-13 - 00:04

There’s a popular market saying, “The time to buy is when there’s blood in the streets.” It serves as a trading strategy for market contrarians, suggesting that the best time to invest is when others are selling in fear, as stock prices are likely undervalued. This occurs when market sentiment is extremely negative as when there is high volatility and panic selling. It also emphasizes that to achieve superior returns, an investor must have the “extraordinary courage” to go against the crowd. At the end of last week following the February 28 concerted attack by the US and Israel on Iran, the market closed at 6,320. 41 of the Philippine Stock Exchange Index or PSEi, suffering a loss for the week equivalent to 290.8 points or 4.40% on a total value turnover of P 8.12 billion, higher than the weekly year-to-date (YTD) average transaction of P7.84 billion. This also left the market’s YTD advance into just 267.49 or 4.42%, roughly half of what it was since the start of the year. The “All Shares” index closed at 3,494.99, down 146.25 points or 4.02% on total value turnover of P40.59 billion, which was slightly lower than the week before, signifying there was no across the board selloff. Nevertheless, stocks in the PSEi basket were badly affected that the individual indices of all the sectors ended in varying degrees of losses. The market continued to slide last Monday, March 9, with the PSEi falling below its 200-D SMA (simple moving average) support line at 6,217 when it closed at 6,006.22, and settling with losses for the day equivalent to 314.19 points or 4.97%. The “All Shares” index also badly lost ground by as much as 148.24 or 4.24% at 3,318.65. Again, all sectors fell lower on a total trading volume of 2.54 billion shares and total value turnover of 11.08 billion. At this point, the market’s next support level is placed at its December 2025 low of 5,900. On Tuesday, March 10, the direction of the market radically changed. This was the 11th day of the attack on Iran by the US and Israel, and the market rebounded. The PSEi closed the day on its session’s high at 6,126.66, with a net gain of 120.44 points or 2.0%. The uptick was sparked by a rally involving a total volume of 1.39 billion shares and value turnover of P7.49 billion that was barely within the market’s regular girth and depth — clearly indicative that market bulls have taken over trading sentiments. This was likewise reflected in the “All Shares” index performance which also closed higher than its low for the day of 3,375.88 at 3,407.61, up 60.86 points or 1.81%. Just a day before, it was difficult to imagine the market could stage this surprising climb back, more so that the massive “big-time” increase in fuel pump prices took effect on March 10: gasoline price was increased by P13 per liter, while diesel increased by P24.25 per liter, and kerosene was increased by P38.50 per liter. Certainly, the agreement between the Department of Energy (DOE) and the oil firms to implement the price adjustments on a staggered basis was also far from being a catalyst to fuel the market’s uptick. But then, just before the market opened on March 10, some good news was unfolding at the other side of the globe. The most crucial factor that was threatening the economic balance of countries like us in this conflict today eased lower: oil prices pulled back following the interview given by US President Donald Trump to US media outlets. The price of Brent crude dropped over 8% from its Monday peak of nearly US$120 per barrel. West Texas Intermediate (WTI) crude prices also fell over 9% after reaching an intraday high of $91.48 per barrel. Speaking publicly Monday night (US time), he described the US military operation in Iran as a “short-term excursion.” He said that it was “very close to finishing.” And even if the military campaign will not end this week, Trump was emphatic that the war will end “very soon.” In a parallel effort to mitigate the spike of oil prices, too, the energy ministers of the Group of Seven (G7) countries were reported to hold a virtual meeting to discuss the possible joint release of oil reserves from their stockpiles. Must Read ​​[In This Economy] How will the US–Iran conflict affect the Philippine economy? The conflict’s core risks In the Monday Circle forum last March 9, Mark Angeles, Estella Villamiel and Andoy Beltran of the FirstMetroSec’s research and marketing team, made a timely talk about what the conflict is all about and their market call. The presentation was entitled “Beyond Headlines: Understanding the Iran Conflict’s Impact.” According to the team, the war by the US and Israel on Iran is not about causing “a global demand collapse” but a “cost-push shock.” The conflict may only lead to sudden, unexpected increase in the cost of production of resources like oil that forces businesses to raise prices to maintain profit margins leading to inflation risks. It is not to cause a wider, systemic breakdown, triggered by resource depletion, rather than just a financial downturn. The cost-push shock of the conflict will ripple through the various “channels” (energy prices → inflation & PHP → rate expectations → earnings & valuations) to eventually impact the broader economy, such as inflation and GDP. Under this situation, there are three scenarios the FirstMetroSec team see into which the market may transform. The first scenario is when “the conflict is a short-lived logistics disruption and not a structural supply loss.” In this scenario, it is assumed that shipping lanes reopen and full traffic resumes within two weeks. Geopolitical risk insurance premium prices are lowered back. Brent crude price normalizes to US$65-$70/bbl or to pre-event levels. Inflation noise fades away. There is no regime shift in policy as the Bangko Sentral ng Pilipinas (BSP) stays on course to its rate easing path. The Philippine peso strengthens modestly as safe-haven demand unwinds. The asset-allocation recommendation is as follows: “Overweight on equities as the market may return to pre-event momentum and passive foreign inflows may resume.” Confine your stock picks to Philippine large-cap stocks preferably found in the MSCI (Morgan Stanley Capital International) basket; Philippine government bonds may stay neutral as inflation premium unwinds and yields remain range-bound as BSP waits for confirmation. Underweight on cash, “risk-on rotation” reduces demand for liquidity buffer. The second scenario may consist of what they call a “Transitory supply shock, but with scars.” In this situation, there will be a slow flow of tankers but it will not collapse. There will be progressive improvement in traffic over the next 2 weeks but full normalization will take longer. But insurance and routing frictions may create temporary supply loss. Brent crude price will trade at US$85–100/bbl and inflation will rise modestly. BSP will shift to a “wait-and-see” stance before making new policy decisions. Growth impact is mild and contained. The peso is estimated to stay around the P58–59/US$ exchange rate. Asset-allocation is recommended as follows: “Overweight on equities for an expected temporary oil disruption may not lead to a bear-case market.” There will be some pressure on energy import margins. Again, favor Philippine large-cap stocks in the MSCI basket that have defensive characters and high-dividend yields. Philippine government bonds are estimated to stay neutral. The BSP will delay rate cuts but will not re-tighten. The market’s elevated rate volatility will keep bonds less attractive but yields will remain sticky. This time, though, overweight on cash. This is because of the unpredictability in the timing of policy changes. This raises the value of liquidity, for optionality matters. The third and worst scenario is that there will be prolonged disruption, depicted as “From logistics issue to full-scale supply shock.” The main assumptions here will be that war-risk insurances are withdrawn, and not just repriced. Tanker flows are curtailed leading to actual and real supply loss. The price of Brent crude will trade between US$100–150/bbl until demand destruction occurs. Inflation will spike and stays elevated. Growth deteriorates faster than inflation falls. The BSP will be faced with a sequencing problem: it will cut prices in the near term to later on pivot toward growth support. The peso weakness will lead to wider trade deficits and risk aversion. Asset-allocation recommendations are as: Underweight on equities. There will be severe trading margin compression. There will be inflation-driven demand destruction. In this situation, you are to implement a recession playbook: stick to defensive stocks, high-dividend yielding stocks, and with a strong balance-sheet picture. Overweight on Philippine government bonds, although yields will ultimately fall as the market will price the eventual easing of rates by the BSP. Market volatility will remain high and the risk of timing becomes paramount. Overweight on cash for there will be volatility spikes as liquidity premium rises. Cash becomes a defensive anchor while waiting for a clearer policy pivot. Market call The situation in the Middle East is still very fluid as of now. The conflict could always turn into something that it is not intended to be. It is best not to rush in to “Buy to the sound of the canon, sell to the sound of trumpets.” – Rappler.com (The article has been prepared for general circulation for the reading public and must not be construed as an offer, or solicitation of an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise. Moreover, the public should be aware that the writer or any investing parties mentioned in the column may have a conflict of interest that could affect the objectivity of their reported or mentioned investment activity. You may reach the writer at densomera@yahoo.com) Must Read PH on the cusp of A-level credit rating: Will this still happen with Middle East conflict?