Ongoing conflict lifts inflation expectations

With the Middle East conflict now entering its second month, high energy prices have produced knock-on effects across global financial markets. The US and European breakeven curves surged as markets repriced inflation expectations and the likelihood of central-bank rate cuts. Nominal yields, particularly at the short end, also rose sharply in countries including the UK. At this stage, some of this reaction seems excessive to us. We think the length of time that energy prices remain high will determine the second‑round inflationary effects.

On the growth front, markets do not appear overly concerned at present. We believe persistently high energy prices would weigh on consumption and growth. Overall, this crisis is generating stagflationary pressures across the global economy. 

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Monica Defend

Monica Defend

Head of Amundi Investment Institute

Markets overestimate the crisis’s inflationary impact and underestimate its growth hit; they are not pricing in the risk of weakening consumption compressing corporate margins.

Monica Defend, Head of Amundi Investment Institute

Active, disciplined duration management

investment

Active, disciplined duration management

The inflation story has received greater attention because of high energy prices and supply disruptions. As a result, markets are pricing in rate hikes by the ECB and the BoE. Although we have revised our assessment of monetary policy, we do not currently expect central banks to raise rates. We expect them to pause to await greater clarity on the crisis and on supply disruptions before making any decision.

Hence, this is a time to be flexible, given opposing pressures (on yields) from rising inflation expectations and safehaven demand. On curves, steepening is our central scenario for the medium term, but we acknowledge that this view is now widely shared across the industry and has already advanced significantly. Overall, we favour a selective approach rather than broad‑based exposure.



 



 



 

 

Focus on areas of long-term resilience

Volatility in equities is explained by the Iran conflict, but importantly, some sections that are pulling back are the ones that have performed well so far this year. Now, the key uncertainty is the duration of the conflict. If tensions ease in the coming weeks, oil prices should normalise, and the current volatility may present attractive entry points across sectors. However, estimating the timing of this will be difficult. 

So, we are sticking to our long-term convictions but acknowledge the near-term uncertainty in equities. Our aim remains to identify quality businesses with strong balance sheets and minimal earnings impact from the crisis. We are also exploring areas exposed to structural growth themes for instance around German fiscal spending, Japanese corporate reforms, and robust EM growth.
 


 


 

Focus on areas of long-term resilience

stacking coins

Tactically cautious, enhanced safeguards

GIV MAY EM

Tactically cautious, enhanced safeguards

Recent events in the Middle East have allowed us to take a step back and reassess how our long-term views will play out. We believe the duration for which energy prices stay high will determine the pass-through of this crisis to the economy. While our macro signals are still calling for a late-cycle environment, they do not fully include the impact of a prolonged crisis. Hence, from a near-term perspective, we have reduced our directional views on risk assets. Secondly, we believe there is a need to strengthen hedges, particularly on DM equities. Overall, it is important to stay diversified and acknowledge that some market movements may have been excessive. 
 

Changes vs previous month

  • Fixed income: Upgraded US duration and downgraded EM LC bonds.

  • Multi-asset: More positive on duration and IG credit, cautious on gold; more constructive on EM bonds, but less positive on equity.

  • FX: Downgraded EM FX to moderately positive.

2026-04-09

Global Investment Views - April 2026

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