Ceasefire expectations drive a cross-asset risk reversal, but energy and macro data remain the key risks
AI summary card
Ceasefire expectations drive a cross-asset risk reversal, but energy and macro data remain the key risks
Goldman Sachs points out that the prospect of a two-week ceasefire has pushed oil prices lower, pulled VIX back to pre-war levels, and supported a rebound in risk assets; however, if the Strait of Hormuz reopening is delayed or the conflict flares up again, Brent could rise to $100-115/bbl in a downside scenario.
- Ceasefire expectations triggered a broad 'risk-on' move: inflation breakevens fell, risk assets rose, and VIX underwent one of its largest resets in recent years, returning to pre-war levels.
- The energy shock had previously pushed cross-asset correlations higher; during risk-off phases, only energy-related assets and the U.S. dollar were relatively capable of decoupling.
- The report maintains a more defensive asset-allocation stance: neutral on equities, overweight cash for the next 3 months, and recommends improving portfolio resilience to both growth and inflation risks.
- In a downside scenario, if the ceasefire does not hold and the Strait of Hormuz reopening is delayed by one month, Goldman Sachs' commodities team expects Brent to reach $100/bbl in 2026Q4; in a severe downside scenario, if production losses reach 2mb/d, Brent could hit $115/bbl.
Report interpretation
Overview
This report assesses the impact of the Middle East conflict and ceasefire expectations around the Strait of Hormuz on global cross-asset performance. The core conclusion is that ceasefire expectations have already driven oil prices lower, reset volatility, and sparked a rebound in risk assets, but the market still needs to watch conflict developments, growth, employment, and inflation data, as well as the central bank policy response two weeks later.
Core views
The report argues that the energy shock has significantly increased cross-asset correlations, leaving only a limited set of assets that can truly diversify during risk-off phases; after the ceasefire, risk appetite is recovering, but if energy prices rise again, front-end rates, inflation expectations, and growth pricing will remain under pressure. Goldman Sachs recommends keeping portfolios defensive, increasing resilience between growth and inflation risks, and using dividend strips, rate receivers, long-bond call options, or selective index call options to express different scenarios.
Analysis framework
The report uses frameworks including cross-asset performance benchmarking, risk appetite indicators, RAI principal component analysis, cross-asset correlation matrices, 60/40 portfolio performance, fund flows, valuation and style, FX forecasts, and positioning to compare the absolute and risk-adjusted performance of different asset classes before and after the ceasefire.
Methodology notes
risk appetite principal component decomposition
Uses risk-appetite-related principal components to explain beta-implied returns across asset classes and identify which assets led or lagged during the energy shock and ceasefire rebound.
balanced stock-bond portfolio performance comparison
Compares the past 12-month relative total return of 60/40 equity/bond portfolios by region to assess the resilience of traditional balanced portfolios after the shock.
cross-asset correlation matrix
Uses weekly local-currency returns to calculate current 1-year correlations and compares them with percentile ranks since 2001 to measure whether the shock caused assets to rise and fall together.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Energy and Brent crudeA direct beneficiary or pressure point of the Strait of Hormuz conflict and ceasefire path
- Strengths
- If supply is disrupted, energy prices may remain elevated, and energy-related assets can decouple relatively better during risk-off phases.
- Weaknesses
- A ceasefire and restored oil flows would push oil prices lower and weaken the relative advantage of energy assets.
- Comparison
- Compared with most risk assets, energy-related assets have more event-hedging characteristics in the early stages of a war shock.
- Risks
- Ceasefire failure, delayed reopening of the Strait of Hormuz, larger production losses, and inflation pass-through.
- EquitiesOne of the main beneficiaries of a recovery in risk appetite
- Strengths
- Risk appetite improves after the ceasefire, and momentum stocks and some index call options perform well after the volatility reset.
- Weaknesses
- If macro surprises remain negative or growth fears emerge, equities may lack support from growth-related pricing.
- Comparison
- The report keeps equities neutral rather than overweight and prefers using selective options to express downgrade scenarios.
- Risks
- Earnings disappointments, weaker growth data, insufficient policy support, and renewed geopolitical tensions.
- CashA defensive portfolio-allocation tool
- Strengths
- Provides liquidity and portfolio cushioning amid conflict and macro uncertainty.
- Weaknesses
- If risk assets continue to rally, cash may weigh on relative returns.
- Comparison
- Goldman Sachs says it has maintained a neutral stance on equities and overweight cash for 3 months since the start of the Middle East war.
- Risks
- Opportunity cost and changes in the interest-rate path.
- Inflation-linked bonds and linkersA hedge against energy shocks and inflation risk
- Strengths
- The report says TIPS and linkers led in beta-implied returns.
- Weaknesses
- Short-term performance may come under pressure as breakeven inflation falls on ceasefire expectations.
- Comparison
- Relative to precious metals and the U.S. dollar, inflation-linked bonds were stronger near the shock trough.
- Risks
- Falling energy prices, rising real yields, and tighter central bank policy.
- U.S. dollarA relative safe-haven asset during risk-off phases
- Strengths
- During the energy shock and risk-off phase, the dollar was one of the few assets capable of relative decoupling.
- Weaknesses
- As risk appetite recovers after the ceasefire, the report says the dollar lags relatively.
- Comparison
- Like energy-related assets, the dollar has more defensive characteristics during the shock phase; however, it performs less well than risk assets once the risk reversal begins.
- Risks
- A recovery in risk appetite, weaker U.S. macro data, and changes in policy expectations.
- Rates and long-duration bond optionsHedging tools in a growth-fear scenario
- Strengths
- The report says EUR and USD receivers, as well as long-bond call options on IEF and TLT, are attractive in a growth-fear scenario without policy intervention.
- Weaknesses
- If inflation pressures dominate or energy prices rise again, duration assets may come under pressure.
- Comparison
- Compared with directly adding duration, option structures can limit losses while preserving upside from the scenario.
- Risks
- Sticky inflation, hawkish central bank reactions, and higher yields across the curve.
Key data
- Report date2026-04-13 7:13PM BSTThe cover page identifies the report as Portfolio Strategy Research.
- US headline CPI+0.87%The report says U.S. headline CPI rose 0.87% on Friday.
- Monthly change in U.S. gasoline prices+21.2% m/mThe report says this was the largest monthly increase since 1967 and pushed headline CPI higher.
- Initial jobless claims in the U.S.+16kThe report says the labor market remains resilient, with initial claims rising modestly while continuing claims fell to a near two-year low.
- S&P 500 EPS consensus+12% y/yThe report says the U.S. earnings season has begun, with market consensus expecting S&P 500 EPS to grow 12% year over year.
- STOXX 600 EPS consensus+4% y/yThe report says the European earnings season has begun, with market consensus expecting STOXX 600 EPS to grow 4% year over year.
- Brent downside scenario$100/bbl in 2026Q4Assumes the ceasefire does not hold and the reopening of the Strait of Hormuz is delayed by one month, while production fully returns to pre-war levels.
- Brent severe downside scenario$115/bblThe report says Brent could reach this level if production losses reach 2mb/d.
- Impact of natural gas prices on core inflationEach 10% increase raises core inflation by 1-5bpGoldman Sachs economists estimate the impact is more pronounced in European countries.
Impact & implications
For portfolios, the ceasefire rebound has reduced near-term tail risk, but it has also lowered hedging costs, making selective index call options more attractive in a downgrade scenario. At the same time, energy prices, macro surprises, and central bank reactions could still reprice growth and inflation risks, so the report favors improving portfolio resilience rather than simply chasing the rebound in risk assets.
Risks
- The ceasefire fails to hold and the reopening of the Strait of Hormuz is delayed, causing oil prices and the energy risk premium to rise again.
- Higher energy prices pass through to inflation, especially pressuring front-end yields in Europe and the UK.
- Macro surprises remain negative, weakening cross-asset growth pricing and the basis for the rebound in risk assets.
- Cross-asset correlations stay elevated, reducing the effectiveness of traditional diversification.
- Options, ETFs, and derivatives strategies carry risks of principal loss, illiquidity, trading costs, and structural risk.
What to watch
- Specific developments in the Middle East conflict and the restoration of oil flows through the Strait of Hormuz.
- U.S. PPI, industrial production, employment data, and subsequent CPI components.
- Final March HICP data for major European economies.
- The policy response from major central banks two weeks later.
- U.S. and European earnings seasons, especially whether S&P 500 and STOXX 600 earnings meet consensus expectations.
- Changes in VIX, inflation breakevens, energy prices, and cross-asset correlations.