Economic Watch: Understanding the Intertwined Faith of the Global Tension and the Local Financial Market

The Tension: Operation Epic Fury

On February 28, 2026, a joint US-Israeli military operation, dubbed Operation Epic Fury, launched a massive decapitation strike that killed Iran’s Supreme Leader, Ali Khamenei. In retaliation, Iran launched hundreds of missiles and thousands of drones across the region, targeting energy infrastructure and commercial hubs.

Most critically, Iran has effectively closed the Strait of Hormuz, halting approximately 20% of the world’s oil and LNG supply. Military operations are ongoing. While US-Israeli forces have degraded Iran’s air defenses and navy, the conflict has paralyzed Middle Eastern travel and shipping, with insurance for vessels in the region nearly nonexistent.

Despite some recent rhetoric suggesting a “short-lived” conflict, physical supply disruptions are intensifying. Markets are now pricing in a prolonged crisis, as Iran’s new leadership under Mojtaba Khamenei has adopted a hardline stance.

What has happened so far?

Globally, the primary economic implication is a severe energy-supply shock that threatens to induce a worldwide recession. Brent crude prices surged toward $120 per barrel in early March, with analysts from Goldman Sachs and JPMorgan warning of $150 — or even $200 — per barrel if the Strait of Hormuz remains blocked.

This “dual-chokepoint” crisis, involving both the Gulf and renewed Houthi attacks in the Red Sea, has disrupted nearly one-third of seaborne crude trade. For major economies, this translates into a “stagflationary” cocktail: soaring headline inflation paired with anemic growth, as shipping costs skyrocket and supply chains are rerouted around the Cape of Good Hope.

For the Philippine economy, macro fundamentals are under immediate stress. The Department of Economy, Planning and Development (DEPDev) has warned that a protracted conflict could shave up to 0.3 percentage points off the country’s GDP growth, potentially pushing it below the 5% target.

Inflation is the most pressing concern. While February’s print was a manageable 2.4%, economists warn it could spike above 6% if oil prices remain elevated. The Philippine Peso has already borne the brunt of this uncertainty, tumbling to the 59.00 level against the U.S. Dollar as investors flock to “safe-haven” assets.

The Bangko Sentral ng Pilipinas (BSP) now faces a policy dilemma. Prior to the escalation, the BSP was on a steady easing path, having lowered the benchmark rate to 4.25%. However, Governor Eli Remolona Jr. has signaled a “hawkish” pivot, indicating that further rate cuts are likely off the table — and hikes remain a possibility — to defend the Peso and anchor inflation expectations.

This sudden halt in the easing cycle has dampened hopes for a liquidity-driven recovery in the domestic economy, as the central bank prioritizes price stability over growth in the face of imported energy shocks.

Impact on Philippine Financial Markets

The Philippine Stock Exchange Index (PSEi) has mirrored this macroeconomic anxiety, witnessing a massive sell-off that wiped out nearly ₱1.4 trillion in market value since the strikes began.

The benchmark index fell below the psychological 6,000 support level on March 9, as “risk-off” sentiment hit energy-sensitive conglomerates and consumer stocks hardest. Investors are pricing in higher operating costs and weaker consumer purchasing power, prompting a flight from equities into less volatile instruments or cash.

The Philippine bond market is similarly strained, with yields under upward pressure. The combination of a weakening Peso and the BSP’s paused easing cycle has pushed local Treasury bond yields higher, reflecting an increased risk premium.

Market participants are bracing for a period of “higher-for-longer” interest rates, which has cooled demand for long-term fixed-income securities. As the Middle East conflict evolves, the local financial market remains in a defensive posture, awaiting any signs of de-escalation that might stabilize oil prices and restore confidence in emerging market assets.

Looking Ahead

Despite the immediate gloom, several structural factors provide a basis for optimism among long-term investors. Corporate fundamentals remain remarkably resilient, with index members projected to see average earnings growth of 15% this year — particularly in the banking sector, which continues to report record profits and robust returns on equity.

Furthermore, the Philippine equity market is trading at deeply discounted valuations, near Global Financial Crisis-level multiples, suggesting much of the geopolitical risk may already be priced in. Analysts note that the Relative Strength Index (RSI) for the PSEi has entered oversold territory, which historically precedes a technical rebound once market sentiment stabilizes.

Optimism is further supported by a steady 31% increase in Foreign Direct Investment (FDI) and a dynamic services sector, particularly IT-BPO, which acts as a natural hedge against domestic downturns.

Additionally, the government’s commitment to maintaining infrastructure spending at 5–6% of GDP, coupled with potential election-related spending as the 2026 midterm cycle approaches, provides a solid floor for domestic demand.

Navigating Market Volatility

The recent geopolitical tensions and rising oil prices have triggered short-term market volatility, which is a normal response during periods of uncertainty. While there are no clear signs yet, the situation remains fluid and could escalate, de-escalate, or reach a ceasefire depending on diplomatic or military developments.

History shows that markets tend to recover once conditions stabilize.

It is important to remember that mutual fund investments are designed for long-term goals, such as retirement or wealth accumulation. Staying invested allows portfolios to benefit when the market rebounds.

A useful historical example is the Russia-Ukraine conflict in 2022, during which the market fell from 7,500 to 5,700 but rebounded to 7,100 within just three months.

One of the biggest mistakes investors make during crises is panic selling — selling at the bottom and missing out on the recovery.

Market volatility can actually be seen as a “sale” in the financial markets, similar to when your favorite brand puts handbags or shoes on discount. Just as you wouldn’t pass up a great deal in a store, this can be an opportunity to buy investments at lower, discounted prices.

Rest assured that CAMCI is actively monitoring the situation and reviewing portfolio allocations to manage risks. While market fluctuations can feel uncomfortable, they are a normal part of long-term investing and often present opportunities for growth.

Now is actually an opportune time to become a CAMCI Investor! Consult and inquire about your suitable investment via email at:
📧 camci.sales@cocolife.com
📧 cocolifefunds@cocolife.com

| CAMCI Digest March 12, 2026 

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