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In our 11 March update, we noted the appointment of Iran’s new Supreme Leader, Mojtaba Khamenei. As the son of the former leader, he represents continuity. At the same time, tensions with neighbouring Gulf states have broadened. Together, these factors shift the balance of probabilities toward our Scenario 2 outcome - a period of prolonged disruption with stagflationary pressure.
This is now reflected in our process. Inflation is the dominant regime at 43% probability, which has historically been a difficult backdrop for risk assets. It also aligns with the Investment Committee’s current assessment of risks.
To be clear, a full-scale Middle East war is not our base case. However, as disruption drags on, the risks to asset prices skew to the downside. The table below summarises potential timelines and outcomes. Scenar
Another way to frame the sequencing risk from a major oil and gas supply shock is provided below. By this logic, we are currently in Phase 2.
Phase 1 | Days 0–14 -> Panic & Repricing
Phase 2 | Weeks 2–6 -> Buffer Deployment
Phase 3 | Months 2–6 -> Demand Destruction
Phase 4 | Months 6–18 -> Adaptation
The broader macro backdrop has also softened at the margin. The US labour market weakened in February, concerns in private credit persist, and liquidity is less supportive than in recent months. Taken together, this points to a more fragile near-term environment.
The RBA also raised rates yesterday in a close 5-4 decision. Energy price risks linked to the Middle East were a key swing factor, reinforcing the stagflationary impulse we are seeking to manage.
We have increased cash across the United Portfolios to the 30% maximum.
Initially, we reduced risk on the basis that this event could escalate. We have now taken it further in recognition that it is escalating, and that risk assets are vulnerable to a more meaningful correction.
Holding higher cash is the most practical step at this point. It gives us flexibility to deploy capital when opportunities emerge, while also supporting income across the portfolios. As part of this recalibration, we have initiated a small 1% position in CRYP (BetaShares Crypto Innovators ETF) in the Growth Plus portfolio. We expect to build this position over the coming weeks.
We will continue to monitor developments closely and redeploy capital as and when the risk-reward improves.
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UA is committed to collaborating with and assisting our clients to achieve and surpass their financial goals. If you're considering your next move, be sure to contact us today!
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