Navigating the Current Global Uncertainty – Note from CIO

The ongoing geopolitical conflict in the Middle East has introduced a new layer of macro uncertainty, primarily through its impact on energy markets and global liquidity conditions. 

The region accounts for a significant share of global oil supply, and any disruption, especially around key routes like the Strait of Hormuz, has immediate implications for oil prices, inflation, and financial markets globally.

What this means for India 

India remains relatively more vulnerable in such a scenario due to its dependence on imported energy: 

• ~55% of crude oil and ~60% of LNG imports come from the Middle East 

• Higher oil prices directly impact inflation, current account deficit, and currency stability 

• A sustained rise in oil can lead to higher interest rates and slower economic growth 

We are already witnessing early signals: 

• Oil prices above $100 

• INR depreciation pressures 

• Volatility across equities and global bond markets 

Key Monitorables 

The direction of markets will largely depend on: 

• Oil sustaining above or below $100/barrel 

• US Dollar strength: DXY sustaining above 100 

• Global bond yields: US 30-year Treasury yield sustaining at or above 5% 

These will determine whether we move into a stagflationary phase or revert to a reflationary growth phase. 

Portfolio Positioning 

In this environment, our approach is guided by prudence, diversification, and optionality: 

1. Risk Management First 

• Maintain adequate liquidity 

• Avoid excessive duration in fixed income (prefer short duration, high-quality credit) 

2. Equity Positioning 

• Prefer sectors with pricing power or global tailwinds 

• Energy, commodities, and select defensives have shown relative resilience 

• Financials and rate-sensitive sectors may remain volatile 

3. Currency Awareness 

• INR may remain under pressure in the near term, though structurally still supported 

• Global diversification remains important 

4. Hedges & Strategic Allocations 

• Gold and real assets act as portfolio stabilisers over cycles 

• Select exposure to global opportunities and commodities can provide balance 

Our View 

While near-term volatility is elevated, such phases are also important reset points in markets. 

We do not believe in reacting to events tactically, but in positioning portfolios structurally to: 

• Withstand shocks 

• Participate in long-term growth 

• Preserve and compound wealth across cycle 

Closing Thought 

In times of uncertainty, the focus should shift from predicting outcomes to preparing portfolios. 

At Entrust Family Office, our endeavour remains to stay disciplined, long-term oriented, and aligned with client goals, ensuring portfolios are resilient yet well-positioned for emerging opportunities.