Deal or no deal? Philippines equities hang

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In a market focus report, analysts of First Metro Securities Brokerage Corp. acknowledge that Philippine equities enter April at a critical juncture.

They note that while the two-week US-Iran ceasefire removed the immediate tail risk and triggered a relief rally across global markets, the underlying drivers of volatility remain unresolved.

With negotiations still fragile and the geopolitical backdrop highly fluid, the brokerage firm admitted that there is no single base case for the equities market outlook. Instead, two plausible near–term scenarios will shape the path.

If talks falter, it believes that the market reverts to risk-off mode. Oil and freight costs would spike again, squeezing margins, eroding real incomes and deepening economic scarring. Policy sequencing becomes more complex as the Bangko Sentral ng Pilipinas balances inflation risk against weaker growth, while fiscal buffers come under renewed strain. In this environment, equity strategy shifts decisively toward defensive, resilience–first positioning, prioritizing stable cash flows, pricing power and low energy intensity names.

On the other hand, FirstMetroSec said, if a durable ceasefire holds, the macro narrative turns constructive. The unwinding of the energy shock supports a high-beta, macro-relief trade.

Philippine equities benefit from easing inflation and the reopening of policy space. Markets would move through a phased repricing: initial risk-premium compression, followed by macro data confirmation and eventually policy re-anchoring and a broadening cyclical recovery. Foreign inflows, a softer US dollar and the reversal of macro drags reinforce this upside, particularly for MSCI Philippine constituents.

However, the Metrobank-led brokerage firm acknowledged that while we await the outcome of the two-week ceasefire, it recommends a balanced approach with defensives and high-beta exposure via MSCI large caps. “Stay nimble: lean into large-cap index names as signs of a durable ceasefire emerge, but be prepared to rotate back into defensives if talks falter.”

The conflict that began on Feb. 28, FirstMetroSec said, marked a decisive escalation from a tense standoff to a sustained, multi–front confrontation in the Middle East. Prior to the attacks, tensions were already elevated: nuclear talks between Washington and Tehran had stalled, Iran’s proxy activity was intensifying and shipping disruptions through the Strait of Hormuz were beginning to weigh on global energy flows.

Weeks of failed diplomacy culminated in coordinated US–Israel strikes on Iran, turning a fragile equilibrium into a full–scale regional conflict with direct spillovers into global markets.

As the strikes unfolded, US and Israel targeted Iran’s military–industrial infrastructure – such as missile launchers, naval facilities and nuclear–linked sites – with the clear intent of degrading capabilities over time. Iran’s retaliation quickly broadened beyond Israel, striking US bases, allied facilities and shipping routes across the Gulf.

This escalation drew Gulf Cooperation Council countries directly into the conflict and froze tanker traffic through the Strait of Hormuz, a chokepoint that handles roughly one–third of global seaborne oil and 20 percent of LNG trade. Insurance coverage collapsed, premiums surged and shipping activity dropped to near zero despite US assurances of security.

FirstMetroSec emphasized that the conflict was not simply a geopolitical headline; it was a macro transmission shock. Energy prices surged, inflation expectations rose and investors began repricing rates and earnings through the lens of higher–for–longer oil. Spot Brent spiked, albeit futures curves remained anchored, signaling that traders still viewed the disruption as temporary. Nonetheless, the embedded risk premium was unmistakable.

On the local front, Philippine markets reacted swiftly. After a strong start to 2026, with foreign inflows driving the PSEi higher in January and February, the escalation reversed much of that momentum. By late March, the index had fallen sharply, foreign investors turned net sellers and the peso slid to historic lows.

What had been a constructive start to the year for Philippine equities – buoyed by foreign inflows and passive GEM allocations – was abruptly reversed, as the energy burden and geopolitical uncertainty weighed heavily on sentiment and valuations.

US President Donald Trump’s April 7 announcement of a two–week conditional ceasefire is a key development, FirstMetroSec points out, with the US agreeing to suspend strikes if Iran reopened Hormuz, and Iran’s Foreign Minister Abbas Araghchi confirming acceptance, committing to allow safe passage of marine traffic during the ceasefire period.

This temporary de–escalation removed the immediate tail risk of catastrophic escalation and the feared Iranian retaliation against Gulf energy infrastructure. Financial markets reacted with instant relief: equities rallied and Brent/WTI crude fell by approximately 16 percent to $94/bbl, reflecting easing concerns over tail risk scenarios. Unfortunately, negotiations between the US and Iran have not resulted in an agreement.

In FirstMetroSec’s view, the ceasefire remains narrow in scope and duration. Two weeks is a slim window, while structural damage to critical infrastructure is already significant. Confidence in Hormuz passage remains fragile as Iran retains strategic leverage even in a de-escalation scenario.

FirstMetroSec believes that oil and fuel prices are unlikely to return to pre–conflict levels anytime soon, with elevated risk premia persisting until a durable ceasefire framework is established. As DBS regional oil strategists point out, the US “15–point plan” and Iran’s “10–point plan” outline fundamentally incompatible end–states: rollback versus recognition of Iran’s nuclear program, and free passage versus controlled leverage in Hormuz. This suggests negotiations will likely be extended multiple times before even a partial deal is reached.

The brokerage firm believes that if there are ceasefire violations and there is a reescalation, it would reinforce the very macro risks that a ceasefire seeks to unwind. Renewed strikes, fragile shipping flows and thin trust in negotiations would quickly reembed volatility into energy markets and re–ignite inflation premia.

According to FirstMetroSec, “The current ceasefire is constructive, but remains fragile: the US and Israel pursue different agendas and outcomes; the Strait of Hormuz remains under Iran’s control, with no guarantee of freedom of navigation and negotiation terms remain vague, with tight timelines and limited enforcement.”