Oil above USD 110: should investors change their portfolios now?

Update (10 March 2026):  This article was written on 9 March 2026 when Brent crude was trading above USD 110 per barrel, following the closure of the Strait of Hormuz in the wake of the US-Israel strikes on Iran. Since publication, prices have retreated to approximately USD 90.  The author's core thesis is unchanged.

Oil has surged above USD 110 per barrel, and markets are reacting accordingly. Brent briefly rose close to USD 120 as the conflict in the Middle East intensified and fears of supply disruption escalated. Even after that initial spike, prices were still holding near USD 110 at the time of writing.

Equities have sold off, inflation concerns have returned, and investors are once again asking the same question: should I be doing something different now?

This is a serious move. But serious moves do not automatically require dramatic portfolio changes.

Our message to investors is straightforward: stay disciplined, avoid emotional decisions, and separate short-term shocks from long-term strategy.

What has changed

What has changed is the scale of the move.

At the time of writing, Brent crude was still trading close to USD 110 per barrel. Oil is no longer just reacting to geopolitical headlines. With the conflict showing no signs of abating and maritime traffic through the Strait of Hormuz effectively halted, markets are now pricing a much higher probability of a meaningful supply shock.

That is why oil has risen so sharply, why expectations for rate cuts have become more cautious, and why risk assets have come under pressure.

A temporary spike in oil can unsettle markets. A sustained disruption to energy supply is different. That is the scenario investors are now trying to assess.

What higher oil means for Asian markets

Higher oil prices are generally a headwind for Asian equities because most Asian economies are net energy importers. The immediate impact is higher inflation expectations, less room for rate cuts, weaker consumer sentiment, and pressure on margins for transport, industrial, and other energy-intensive sectors.

We are already seeing this in markets, with several Asian indices coming under pressure as oil moved above USD 110 and investors priced in a more difficult inflation backdrop.

For the STI, the near-term impact is also likely to be negative. Singapore remains highly dependent on natural gas, and nearly half of our gas imports come from Qatar, which has halted production following the recent attacks. That raises the risk of higher energy costs and, potentially, higher electricity prices.

That said, Singapore’s longer-term market story remains intact. We are still in the midst of a market revival, supported by a broad set of government measures, including the EQDP. Singapore is also benefiting from the AI investment boom through its role in the global semiconductor supply chain.

Furthermore, if the conflict becomes more prolonged, some wealthy investors who previously viewed parts of the Middle East as a relatively safe wealth hub may look to diversify geographically. In that scenario, Singapore could benefit, given its reputation for political stability, strong rule of law, and established wealth management ecosystem.

More broadly, several Asian markets that are selling off now still have strong structural tailwinds. South Korea remains a beneficiary of the memory upcycle. Taiwan, through TSMC, continues to enjoy a near-monopoly position in advanced AI chip manufacturing. Japan is still undergoing a long-awaited economic transformation, supported by corporate reforms and improving profitability. China’s long-term structural story also remains intact, with stronger policy support for the private sector, continued efforts to achieve technological self-sufficiency, and growing overseas expansion by Chinese companies.

So while the near-term impact on Asian markets could be meaningful, especially if disruption persists and oil prices continue to rise, these multi-year structural tailwinds do not disappear because of the Iran war.

Why oil prices should eventually come down

Oil can remain elevated in the near term because markets are focused on real disruption risk around the Strait of Hormuz and regional energy infrastructure. But there are still reasons to believe prices should eventually come back down.

1. Incentives still discourage a full energy shock

As we highlighted in our previous article, a full-scale escalation would be damaging for both sides. That logic has not changed.

For the US, high energy prices are both economically and politically painful. American voters feel higher gasoline prices immediately, and with mid-term elections approaching, sustaining a conflict that keeps Brent above USD 110 carries growing political risk. The Trump administration has already deployed supply-management tools. The US has cleared the way for India to temporarily increase its purchases of Russian oil, with Treasury Secretary Bessent signalling that more could follow.

From Iran’s perspective, disrupting the Strait of Hormuz would be economically self-destructive. It would choke off its own exports, restrict access to critical imports, and strain relations with China, its most important economic partner. Iran’s military capabilities have also been severely diminished, raising doubts over whether it can sustain a prolonged conflict. It would also risk retaliation from Gulf states that have largely remained neutral until now.

2. Supply buffers can cushion shocks

Even if oil flows are disrupted, there are still mitigating buffers.

OPEC retains significant spare capacity that can be deployed to fill supply gaps. Saudi Arabia and the UAE also have pipeline capacity that can bypass the Strait of Hormuz, while Egypt’s Sumed pipeline provides another partial workaround. Major economies such as the US and China hold sizeable Strategic Petroleum Reserves, and private-sector inventories can also help cushion near-term shortages.

In Asia, stockpiles are meaningful. Japan holds emergency oil reserves equivalent to roughly 254 days of domestic consumption. China has around 100 to 130 days of coverage. Taiwan has more than 100 days of crude reserves and enough natural gas reserves for more than 11 days, with coal available as backup.

South Korea’s LNG buffers are much shallower, but its oil reserves are still substantial. Semiconductor fabs have also been prioritised within the country’s power allocation framework, which helps reduce the immediate risk to Samsung and SK Hynix. They will be the last to feel physical power constraints, not the first.

This year, we are also seeing a rapid expansion of LNG supply, mostly from North America, which should help ease pressure over time.

These buffers may not prevent a short-term supply squeeze, but they can make it more manageable.

3. Long-term fundamentals still look soft

This is the most important point.

Long-term fundamentals remain the anchor for oil prices. Global oil demand growth is moderating, with China’s economic slowdown continuing to weigh on the outlook. China’s oil demand is also facing a longer-term structural headwind as renewable capacity expands and electric vehicle adoption accelerates.

A prolonged energy disruption is economically painful, but it is not permanent. The structural forces that were suppressing oil prices before this conflict began – slowing demand growth, the electric vehicle transition, and high OPEC spare capacity – are likely to reassert themselves once the Strait reopens and supply conditions normalise.

So while oil can stay high in the near term, we should avoid extrapolating the latest spike into a permanent new regime.

What investors should do now

The first mistake is to panic-sell a diversified portfolio.

When markets move sharply, the instinct is often to “do something.” But wholesale changes made in moments of stress are usually driven more by emotion than by process. Selling long-term holdings because oil is spiking can easily lock in losses at the wrong time.

A better approach is to ask a simpler question:

If oil stays above USD 100 and equity markets remain weak, can I tolerate that outcome without panicking or changing my long-term plan?

If the answer is yes, then staying diversified and rebalancing back to your intended risk profile may be enough. It may also create opportunities for long-term investors to add selectively to attractive areas.

If the answer is no, then a small tactical hedge may make sense.

That distinction matters. The purpose of a hedge is not to maximise returns. It is to reduce regret in a bad scenario.

If using oil as a hedge, keep it small

For most portfolios, any oil hedge should remain small and rules-based.

A practical guide is to keep the position around 2-3% of the portfolio. That is usually enough to matter if the shock worsens, while remaining small enough that it does not dominate outcomes if oil falls back. If the position rallies and grows beyond 4–5% of the portfolio, it should be trimmed back toward target.

If the position falls by around 20% from entry and there is no evidence of sustained supply disruption, investors should consider reducing or exiting it.

Most importantly, this should be reviewed regularly. Check the position weekly for key developments, and reassess weekly whether the hedge is still needed.

In other words: size it like insurance, manage it with rules, and do not let it drift into a large directional bet.

Related article: Oil is volatile again – here are two practical ways to get exposure  

Crisis can create opportunities

For long-term investors, the focus should still be on areas where earnings visibility remains strong and structural growth drivers are intact. These opportunities are supported by longer-term trends that are likely to persist beyond the current bout of volatility.

One such area is the internet sector. After recent pullbacks, valuations across major internet companies have become more reasonable, even as long-term growth drivers remain intact. Investors seeking diversified exposure may consider the Invesco NASDAQ Internet ETF (NASDAQ:PNQI), which provides broad access to leading internet companies.

Investors may also benefit from diversifying into markets where structural improvements are unfolding and valuations remain more attractive.

Japan continues to benefit from corporate reforms and improving profitability, supporting long-term equity returns. Value-oriented strategies, such as Eastspring Investments – Japan Dynamic AS SGD, are relatively well cushioned against near-term volatility due to their disciplined valuation approach. At the same time, the fund maintains meaningful exposure to Japanese small-cap companies, offering investors access to domestically driven businesses that remain undervalued relative to large caps as the rally broadens.

Europe offers another layer of diversification. Unlike the US, which is heavily concentrated in technology, Europe offers meaningful exposure to financials, industrials, healthcare, and energy – sectors that tend to perform differently across market cycles and can help smooth portfolio volatility. For a low-cost, diversified way to access this opportunity, we recommend the Vanguard FTSE Europe ETF (NYSE:VGK).

Closer to home, Asia continues to present compelling structural opportunities.

Singapore equities, after several years of muted performance, are beginning to benefit from stronger earnings visibility and policy initiatives aimed at improving market depth. This could mark the early phase of a multi-year recovery. Singapore is also benefiting from the AI investment boom through its role in the global semiconductor supply chain. In addition, Singapore could see some support if wealthy investors choose to diversify part of their wealth away from the Middle East.

China also remains a long-term earnings story, with policy support for innovation and private-sector growth strengthening, while leading companies are becoming increasingly competitive globally. Contribution from overseas revenue should also become a long-term structural earnings tailwind.

Meanwhile, Asian semiconductor firms offer a more valuation-disciplined way to participate in the ongoing AI boom, supported by strong pricing power and sustained demand visibility.

Related article: Middle East war rocks Asian markets, but don’t let fear drive your trades  

The bottom line

Oil above USD 110 is a meaningful market event. It deserves attention. But it does not call for panic.

Long-term portfolios should still be built around diversification, earnings visibility, and structural growth drivers. A geopolitical shock can change the near-term backdrop, but it does not mean every long-term theme is broken.

That is why our broader recommendations have not changed.

The right response is not to rebuild the portfolio around one crisis. It is to make sure the portfolio can withstand different outcomes.

Markets have lived through major shocks before, including Covid-19 and the Russia-Ukraine war. In both cases, periods of fear also created opportunities for disciplined long-term investors. The same principle applies today: stay calm, stay selective, and keep your focus on long-term fundamentals rather than short-term headlines.

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Declaration:

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a NIL position in the abovementioned securities. The analyst who produced this report holds positions in iShares Hang Seng Tech ETF and Global X Asia Semiconductor ETF.