To The Moon

Source: DBS Chief Investment Office, Market Pulse

Publication Date: 2 March 2026

This article is based on and adapted from the original report.

Hi, Tigers~👋

How’s everyone navigating this week’s volatility? Have you managed to capture any excess returns during the swings — or has risk control been the bigger win?

Over the past week, the pricing logic of global risk assets has shifted noticeably. The sudden escalation of U.S.–Iran tensions, the risk of an oil supply shock, a potential rebound in inflation expectations, and growing divergence within the AI theme have converged at once.

With multiple variables interacting simultaneously, markets are entering a phase characterized less by clear direction and more by rising volatility.

So today, let’s break this down together.

In this edition, we focus on three key questions:

• Will the escalation of war evolve into a prolonged structural risk?

• How could an oil shock reshape the inflation and interest rate trajectory?

• Amid dual uncertainties in AI and energy, how should asset allocation adjust?

Let’s go step by step.

I. War Escalation: The Risk Lies Not in the Outbreak, but in the Loss of Control

The U.S. has launched military strikes against Iran. This round of conflict differs from previous ones in two important respects:

First, it is not a conventional pre-emptive defensive action, but appears to carry an explicit regime-change objective.

Second, the operation lacks broad participation from European allies, giving it a more unilateral character.

The market’s primary concern is whether this confrontation evolves into a prolonged conflict—and whether it triggers the risk of a blockade of the Strait of Hormuz.

⚠️ Why Hormuz Matters So Much:

• Iran accounts for roughly 3% of global crude oil production.

• Approximately 20% of the world’s crude oil and LNG flows through the Strait of Hormuz.

• If the Strait were blocked, even producers such as Saudi Arabia and the UAE, despite spare capacity, would struggle to bypass this logistical chokepoint.

Under an extreme scenario, oil prices could rise to USD 100–150 per barrel.

Now here’s something to think about: If oil breaks $100 — what does that do to your portfolio positioning?

II. What Would an Oil Price Surge Mean? Two Layers of Market Impact

If oil prices spike rapidly due to supply disruption, two chain reactions are likely:

1. Inflation Expectations Re-accelerate

Supply-driven oil price increases directly lift inflation expectations. This would further constrain the Federal Reserve’s already limited room to cut rates, potentially forcing markets to reprice the interest rate path.

2. Economic Growth Comes Under Pressure

Higher energy costs compress corporate margins and erode consumers’ real purchasing power. If sustained, the probability of a global recession would increase materially.

In essence, the danger of an oil shock lies in its dual impact:

It suppresses growth expectations while simultaneously lifting inflation expectations.

In short:Oil shock = weaker growth + higher inflation.

That combination is uncomfortable for both equities and credit. Have any of you rotated exposure recently because of oil risk?

III. Safe Havens: Gold Remains Core, Not Silver

In volatile macro environments, safe-haven flows tend to return.

But here’s the key debate: Can silver replace gold as a portfolio hedge?

The report’s answer is clear: No.

Reasons:

• Around 60% of silver demand is industrial, making it more vulnerable during economic downturns.

• Its market size is significantly smaller than gold’s (approximately USD 5 trillion vs. USD 36 trillion).

• Silver exhibits higher volatility.

• It lacks gold’s long-standing status as a central bank reserve asset.

Historically, gold has played a foundational role in the international monetary system, and central bank holdings reinforce its function as a store of value.

Therefore, during periods of heightened geopolitical and macro uncertainty, gold’s defensive logic remains more robust.

Now let’s make this more practical: Where do you see gold heading if geopolitical tension persists? $2,500? $3,000? Higher?

And what about silver — does volatility create opportunity, or unnecessary noise? Would love to hear your targets.

IV. U.S. Financials: Fundamentals Remain Resilient

Notably, even as macro risks intensify, the U.S. financial sector recorded a record USD 295.6 billion in profits in 2025.

Key drivers include:

• Improved net interest margins

• Loan book expansion

• A decline in delinquency rates to 1.56%

The report highlights three structural tailwinds:

1. Deregulation releases capital and enhances ROE.

2. A rebound in M&A activity supports investment banking revenues.

3. High-income consumer resilience underpins credit quality.

In a high-volatility environment, large-cap financial stocks may serve as a relatively defensive equity allocation.

Did anyone here increase bank exposure this year? How’s that trade working out?

V. AI: Infrastructure Strength, Application-Layer Divergence

The AI theme remains powerful, but internal stratification is becoming evident.

• Nvidia’s quarterly revenue rose 73% year-on-year.

• Data center revenue accounted for more than 90% of total sales.

• Hyperscale cloud providers continue to expand capital expenditures.

At the same time, discussions about white-collar job displacement are intensifying, and some SaaS and fintech stocks have experienced significant price swings.

The report argues:

• Structural advantages remain with upstream chips and computing infrastructure platforms.

• Platform companies with enterprise ecosystems and capital strength possess deeper moats.

• Application-layer businesses that are easily automated face rising risks.

In other words, AI investing in 2026 will demand more granular sector judgment rather than broad thematic positioning.

Quick question for you: Are you positioned more in infrastructure (chips/cloud), or in application software?

Stocks that you may interested in: $Lockheed Martin(LMT)$ $Northrop Grumman(NOC)$ $RTX Corp(RTX)$ $General Dynamics Corp(GD)$ $L3Harris Technologies, Inc.(LHX)$ , $AeroVironment(AVAV)$ $Kratos Defense & Security Solutions(KTOS)$ $Rocket Lab USA, Inc.(RKLB)$ $AST SpaceMobile, Inc.(ASTS)$ $Iridium(IRDM)$ , $Palantir Technologies Inc.(PLTR)$ $CrowdStrike Holdings, Inc.(CRWD)$ $Palo Alto Networks(PANW)$ $NVIDIA(NVDA)$ $SUPER MICRO COMPUTER INC(SMCI)$ , $Constellation Energy Corp(CEG)$ $Oklo Inc.(OKLO)$ $Vertiv Holdings LLC(VRT)$ $Eaton Corp PLC(ETN)$ , $Exxon Mobil(XOM)$ $Chevron(CVX)$ $Occidental(OXY)$

VI. Short-Term Asset Allocation (3-Month View)

Given the current set of variables, the report leans toward:

• Increasing gold exposure as a geopolitical hedge

• Monitoring large-cap energy stocks as an oil shock hedge

• Maintaining allocations to high-quality financials

• Favoring infrastructure and platform leaders within AI

• Retaining a prudent cash buffer to manage rising volatility

Conclusion

The 2026 market is not defined by a single dominant risk, but by the interaction of multiple forces:

• Escalating geopolitical conflict

• Potential energy supply disruption

• Uncertain inflation trajectories

• Structural transformation driven by AI

Asset correlations are shifting, and concentrated bets on single themes carry greater risk.

In such an environment, timing discipline and structural allocation judgment may matter more than directional conviction.

[Happy]Let's Discuss:

1️⃣ If oil breaks $100, which sector takes the bigger hit — tech or consumer?

2️⃣ Would you increase gold exposure at current levels? What’s your target?

3️⃣ Within AI, where are you positioned — infrastructure or applications?

4️⃣ Most importantly — how has your portfolio performed during this volatility?

Drop your thoughts below. Let’s compare notes.

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