LGT Private Banking House View

April 2026 - in a nutshell

Over the past weeks, the world has become more uncertain again. The conflict with Iran and the effective blockade of the Strait of Hormuz have pushed oil and gas prices sharply higher. This hits regions unevenly: while the United States is cushioned by its energy self sufficiency, Europe is much more exposed and faces the risk of weaker growth combined with higher inflation. As long as this remains a supply shock without strong wage price spirals, central banks can afford to wait - but the range of possible outcomes is unusually wide, so in our view, caution is warranted.

  • Date
  • Author Patrick Huber, Investment Solutions Europe, LGT Private Banking
  • Reading time 7 minutes

Iran map

Against this backdrop, we keep our overall equity stance at "Neutral" and focus on diversification and resilience. We remain "Underweight" investment grade credit and "Overweight" cash, as markets still seem to price in a relatively quick resolution of the crisis and valuations leave little margin for error. Emerging market equities - a strong performer earlier this year - are now more vulnerable due to their dependence on Middle Eastern energy, so we have moved them from "Attractive" to "Neutral" for the time being.

In fixed income, rising uncertainty around inflation has pushed yields higher, but longer term inflation expectations remain broadly anchored. This supports a more balanced view, and we have raised government bonds to "Neutral", while also downgrading Emerging Market Hard Currency debt to "Neutral" given ongoing pressure from a firmer US dollar and higher energy and food costs. 

However, we still expect the greenback to gradually weaken over the coming quarters as the Federal Reserve ultimately eases policy, which should support the euro and the Swiss franc over time. Precious metals continue to benefit from geopolitical tensions and structural demand, but after strong gains we have tactically moved gold and silver to "Neutral". Structurally, we still like them - we just prefer to wait for better entry points rather than chase recent strength.

Macroeconomic environment

The Israel/US conflict with Iran has effectively blockaded the Strait of Hormuz, driving oil and gas prices to multi-year highs. The economic fallout is asymmetric: the US remains relatively shielded by its energy self-sufficiency, while the eurozone risks a stagflationary outcome in an adverse scenario. As long as the price impulse stays supply-driven and second-round effects remain absent, central banks are likely to hold - but the exceptionally wide range of possible outcomes calls for investor caution.

Investment strategy 

Because the range of outcomes amid an escalating Middle East crisis is wide and hard to quantify, we keep equity exposure at "Neutral", focusing on diversification and resilience, while tactically "Underweighting" investment grade credit and "Overweighting" cash. Our scenario analysis suggests the US is relatively resilient thanks to greater energy autonomy, whereas Europe is more exposed to persistent energy price shocks. Market-based inflation expectations have risen in both regions, but the impact will depend on how high and how long energy prices stay elevated. With elevated valuations and investors still pricing in a relatively quick resolution, we see residual vulnerability.

Equity strategy

The longer the conflict persists - and the greater its negative impact on economic activity - the more pressure equity markets are likely to face. How the situation will evolve remains difficult to assess, and volatility is therefore likely to remain elevated.  Until the Iran conflict, emerging markets had performed strongly, mainly driven by Taiwan and South Korea, both of which have a high weighting in the IT sector. However, these countries are also heavily dependent on oil supplies from the Middle East and are therefore more exposed. After strong inflows, investors have recently started to withdraw funds. While we still like the longer‑term prospects for emerging markets, we have downgraded EM equities from "Attractive" to "Neutral" in the current high risk and low visibility environment.

Fixed-income strategy

The Iran conflict has materially elevated inflation risks and triggered a significant repricing in rate markets, though this appears to be driven primarily by heightened uncertainty rather than a fundamental shift in the inflation outlook. Long-term inflation expectations, as measured by 5-year/5-year inflation swaps, remain anchored for the time being. As long as this holds, current short-end yield levels appear overdone. Against this backdrop, we have upgraded government bonds from "Unattractive" to "Neutral". Conversely, we have downgraded Emerging Market Hard Currency from "Attractive" to "Neutral", as structural headwinds from US dollar strength, inflationary pressure, and the particular vulnerability of emerging market economies to energy and food price shocks continue to build.

Currency strategy

We continue to expect the US dollar to depreciate over the coming quarters, as the Federal Reserve is projected to deliver two rate cuts in 2026, more than currently priced, gradually eroding the dollar’s rate advantage. EUR/USD is seen higher, with fair value around 1.16–1.17 and targets of 1.20 (6M) and 1.22 (12M), while a structurally strong Swiss franc and an SNB on hold at 0% - although willing to lean against rapid, excessive appreciation via FX interventions according to the last meeting - support a gradual move lower in USD/CHF toward 0.74 (6M) and 0.73 (12M) and in EUR/CHF toward 0.888.

Precious metals

Precious metals continue to benefit from geopolitical fragmentation, and, for silver, decent structural industrial demand, while central‑bank diversification away from the US dollar provides an additional, steady bid for precious metals. At the same time, tighter financial conditions, elevated volatility and recent price gains have made short‑term valuations more demanding, so despite maintaining medium‑term targets of USD 5300 (6M) and USD 5500 (12M) for gold and USD 88 (6M) and USD 95 (12M) for silver, the tactical stance on both has been reduced from "Attractive" to "Neutral" vs. US dollar. Structurally, geopolitics, decarbonisation trends and ongoing central‑bank and industrial demand argue for further upside over a six‑ to 12‑month horizon, but the preferred approach is to stay on the sidelines for now and wait for more favourable entry points before adopting a more bullish stance again.

LGT Navigator Markets caught between fear of further escalation and ceasefire hopes All articles
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