The energy hedge did its job. Here is what to do next.

What we said and what happened

We have recommended the State Street Energy Select Sector SPDR ETF (NYSE:XLE) and WisdomTree Brent Crude Oil (LSE:BRNT) as an energy hedge across multiple articles since the war began.

In Oil is volatile again (6 March 2026), we introduced both instruments as a 2-3% tactical hedge — insurance against a Hormuz disruption that consensus had not yet priced in. We were explicit from the start: keep sizing small, define a time horizon, and set clear rules to trim or exit as conditions change.

In Oil fell 14% on the ceasefire (10 April 2026), those rules held. The market had priced Hormuz as effectively reopened — it was wrong on three counts. Iran's Revolutionary Guard Corps (IRGC) had published an official mine map. Only 5-6 vessels per day were transiting against 130 before the war. And the ceasefire itself was already fraying — a dispute over whether Lebanon was included had erupted within 24 hours of signing. We said: trim to 2-3% if you are above that, but do not exit.

In Hormuz opened. Then reclosed. (18 April 2026), we called the exit — and we did so knowing the strait had just reclosed. That re-closure was a return to the status quo, not a new escalation. What had genuinely changed was the diplomatic architecture — from non-existent to active — and the opportunity cost of holding the hedge through a live negotiating process was rising faster than the oil spike risk it was designed for.

This article closes the loop — explaining why that call was right, why we remain confident in it today, and exactly how to redeploy the proceeds.

Table 1: How our view evolved – and why

The exit call stands — even if escalation continues

Iran's economic clock is running faster than its military one. The US blockade has cut off approximately USD 435 million per day in economic damage, according to Miad Maleki of the Foundation for Defense of Democracies. Iran has also begun authorising the sale of war-damaged government buildings to raise cash, according to Iranian state media Fars.

Iran's president Pezeshkian called publicly for diplomatic solutions to reduce tensions on Monday morning. That is not the language of a government choosing continued war. That is the language of a government under acute financial pressure.

Trump's political clock is equally binding. His approval rating has hit a second-term low of 37%, with 67% disapproving of his Iran handling and 61% of Americans disapproving of US military strikes against Iran. A president with these numbers does not resume a war two days before a publicly announced negotiating session.

Iran's Foreign Ministry has said it will not attend this week's scheduled talks in Islamabad — the second round of direct US-Iran negotiations — but whether a delegation ultimately arrives matters less than what the preparations reveal. Pakistan has deployed 20,000 security personnel, sealed hotels, and positioned US military transport aircraft at Noor Khan Airbase. Iran's own spokesperson stopped short of a permanent rejection, saying Tehran would determine its next steps based on US conduct.

These are not the signals of a process that has ended. They are the signals of a process under pressure — which is the normal condition of negotiations between adversaries with deep mistrust.

The Hormuz reclosure on Saturday and the Touska seizure on Sunday are genuine escalations — Iran has vowed retaliation, and the ceasefire expires Wednesday. The risks are real.

But the diplomacy process is equally real, even if the outcome has not yet satisfied markets. Iran cannot sustain indefinite conflict the way Russia could — it has approximately 13 days of oil storage capacity and is already liquidating state assets. Trump resuming the war destroys his approval rating before midterms. Neither side can afford the alternative. That is a more reliable foundation for a deal than goodwill.

That is why the exit call stands. The risks have not disappeared — but the overall risk environment has materially improved since the war began. And critically, the Asia thesis does not require the risk to disappear — it held through the worst weeks of the war, and the data in the next section proves it. Holding the hedge through a negotiating process that neither side can afford to abandon is the wrong trade.

The time to rotate into Asia is not after the ceasefire. It is now.

On Monday morning — the day after the Touska seizure, with Iran vowing retaliation and oil up 5% — Korea and Taiwan rose 0.4% and Japan climbed 0.6%, while the S&P 500 fell 0.2% and Europe fell 0.8%. Asia's structural winners went the other way. That is not a prediction. That is what already happened.

And it was not a surprise to anyone who watched what these markets did through the worst weeks of the war.

Korea broke its all-time export record in March with the Hormuz strait closed — USD 86.1 billion, up 48.3% year-on-year, with semiconductors rising 151.4%. TSMC posted its fourth consecutive quarterly profit record in Q1 2026, up 58% year-on-year. Singapore's semiconductor exports surged 113.8% in the first full month of the war.

Japan reinforced the picture — the Nikkei hit an all-time record close of 59,518 on 16 April, driven by TSE governance reforms requiring companies to improve returns to shareholders, the first sustained real wage growth in decades, and a strategic oil reserve covering 254 days of consumption. The record came during the war, not after it.

The broader economies held too. Malaysia's Q1 GDP grew 5.3% as the IMF raised its Malaysia forecast during the war while simultaneously cutting its global forecast. Singapore's Q1 GDP grew 4.6% year-on-year. And China — the market most expected to suffer from its Iranian oil exposure — grew 5.0% in Q1 2026, beating consensus of 4.8%, with EV and hybrid exports more than doubling in March as consumers globally accelerated their shift away from petrol. These markets did not need an open strait. They needed structural tailwinds — and those are intact.

Waiting for ceasefire confirmation means selling the hedge after it has already fallen, and potentially missing the continuation of a rally that has proven it does not need a ceasefire to run. Asia demonstrated that through the worst weeks of the war. It has demonstrated it again on Monday. The rotation is the right trade now.

Table 2: Asia — what the data says

The game plan: four steps

One — exit XLE and BRNT now. The hedge has done its job — holding it further means paying insurance for a risk that has materially lowered, while Asia's structural winners are already running. Do not wait for a signed ceasefire agreement.

Two — redeploy into Asia systematically. Enter through a regular savings plan across Japan, Korea, Taiwan, Singapore, Malaysia, and China. Do not chase the rally with a lump sum — let the structural thesis compound over time.

Three — reduce exposure to rate-sensitive sectors. Hormuz open or closed, the pre-war rate environment has not been restored — rate cuts are off the table, and markets are beginning to price in hikes. Every episode since 1970 where US energy inflation rose above 25% year-on-year was followed by meaningful upward pressure on rates. In fixed income, favour short-to-medium duration bonds. In equities, reduce exposure to real estate, REITs, and long-duration growth stocks. This guidance is unchanged.

Four — hold the structural winners. If Asia pulls back on headlines, do not sell — use it as an opportunity to accumulate further. The thesis is stronger today than it was before the war. The data from the worst weeks of the conflict proves it.

Table 3: Recommended products

The same discipline that got you in should get you out

We recommended the hedge when the risk was real and underpriced, held it when the market mistook a ceasefire for a reopening, and called the exit when the diplomatic architecture shifted and the opportunity cost rose. Three decisions, one framework — and the framework has not changed.

The hedge was the right call. Exiting it is also the right call. These are not contradictory positions — they are the same analytical discipline applied at two different moments in the same trade.

The risk that justified the hedge has materially lowered, the opportunity cost of staying has materially risen, and Asia's structural winners have proven their resilience through the worst weeks of the war. Do the rotation now.

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.