Oil surging above $98 forces investors to reprice risk across investment portfolios, affirms the CEO of one of the world’s largest independent financial advisory organisations.
Nigel Green of deVere Group’s comments come as Brent crude tore through $98 a barrel, its highest level since early June, after a tanker was hit roughly 70 nautical miles southwest of Al Shuqaiq off Saudi Arabia.
Yemen’s Houthis claimed responsibility, saying they had targeted two Saudi vessels with drones and missiles. US West Texas Intermediate climbed in tandem, gaining around 3% to trade near $89, extending a run that has pushed crude sharply higher over the past month alone.
The strike lands hours after President Trump warned Washington would destroy an Iranian bridge or power plant every time Tehran fires on a ship in the Strait of Hormuz. Iran responded through its state news agency, threatening to hit US-linked energy infrastructure across the region in kind.
The escalation arrives as the Federal Reserve is already holding rates steady near 3.50% to 3.75%, with futures markets scaling back expectations for cuts this year as core inflation readings stay stubbornly above target.
A fresh leg higher in crude threatens to undo months of progress on headline inflation as central bankers were gaining confidence that price pressures were finally cooling.
Nigel Green says: “A tanker on fire off Saudi Arabia, and Washington and Tehran trading threats over the Strait of Hormuz. Every investor should be pulling up their asset allocation today.
“Cheap energy got baked into portfolios for years. It’s increasingly, and has been for a while, unwinding in front of us, and most investors haven’t adjusted for it yet.”
Central banks had been edging toward the view that inflation was finally beaten. This kind of spike puts that view on ice.
“Rate cuts investors were counting on for later this year look a lot less certain today than they did even a week ago, and then they were on shaky ground.
“Growth stocks that depend on low rates are going to feel this first. Energy producers and defence contractors are sitting in a much better spot, and that gap is about to widen fast.”
Bond investors had been betting on the Fed cutting through the rest of the year. Oil at these levels makes that bet a lot shakier.
“Duration risk deserves a hard look this week, not next quarter.”
The dollar usually gains when the Gulf turns dangerous, because money runs somewhere safe.
“Currencies tied to energy importers tend to take the hit almost immediately, and anyone holding unhedged international exposure needs to check that risk today.”
The deVere CEO notes: “I’ve seen investors treat these flare-ups as noise before, and it’s cost them.
“Hormuz, the Saudi coastline and a direct threat exchange between two governments don’t add up to noise. This is a live blockade risk sitting on top of the world’s most important shipping lane.
“Spreading risk across assets, regions and currencies matters more this week than it did even last month. It’s how you get through periods like this with wealth intact.”
He adds: “Energy exposure, inflation protection, bond duration and currency positioning all need looking at together, and soon. Clients waiting for things to settle down before they act are taking on a risk of their own, one they haven’t priced in yet.”
Nigel Green concludes: “Every escalation here, whether it’s a tanker strike, a threatened blockade or a direct exchange between Washington and Tehran, feeds straight back into the same question. What does a portfolio look like if oil stays above $95 for months rather than weeks.
“Most investors haven’t run that scenario yet, and they need to start this week.”
