Timelines related to the length of the Middle East conflict are unclear; stating the obvious, the longer the conflict continues the more the damage is, given the Strait of Hormuz (SOH) closure; energy prices have oscillated with the market calibrating the near-term supply shortage with a medium-term good supply position.

In Asia, EM countries (ex Mainland China and Malaysia) are more affected; amongst the developed countries we see South Korea as most affected; we see implications of the economic conditions on the banking sectors of these countries, and so would be more cautious in investments in these jurisdictions in the near term.

We see a limited impact on Australia, Japan, Mainland China and Hong Kong (SAR), which gives us comfort in holding the paper of the first three jurisdictions; while we have a Market perform recommendation on Hong Kong banks we continue to be cautious about their low general provision levels.

We see a particularly low impact of the conflict on insurance companies.

While most NBFIs are unlikely to be materially impacted, HY NBFI spreads have gapped out due to a combination of risk-off and perceived supply risk from Indian NBFIs