BBVA: Invest in Energy & Commodities Amidst Middle East Conflict & Peru Market Volatility

Peruvian investors with substantial assets are increasingly turning to energy and select cyclical sectors as a potential hedge against escalating geopolitical risks stemming from the conflict in the Middle East, according to analysis from BBVA Wealth Management. While the Lima Stock Exchange (BVL) has seen a year-to-date increase of 15.9%, it experienced a 12.4% decline in March, reflecting broader market anxieties. The shifting investment preferences signal a cautious approach amid global uncertainty.

Energy as a Tactical Cover

Carlos Müller, Director of Strategy and Investment Advisory at BBVA Perú’s Global Wealth division, recommends a strategic allocation to the energy sector. “Energy makes sense for two reasons,” Müller stated. “First, if there’s a technical rebound in the market – which is my investment thesis – the world will need more energy, meaning energy companies should be structurally a little more profitable since they sell more.” He suggests considering an Exchange Traded Fund (ETF) focused on energy stocks as a potential avenue for exposure.

The rationale extends beyond a potential market recovery. Müller points out that a prolonged conflict in the Middle East could disrupt productivity and drive up oil prices. As of yesterday, crude oil had rebounded to around US$107 per barrel, making previously unprofitable extraction projects viable and incentivizing increased oil production. BBVA recommends an initial allocation of approximately 5% of a portfolio to energy companies, with a gradual increase should the conflict escalate. You can uncover more information about the Lima Stock Exchange at the BVL website.

Cyclical Exposure and US Equities

Beyond energy, BBVA Wealth Management suggests maintaining exposure to US equities, with a focus on cyclical sectors like materials (mining), industrials, and utilities. This shift is driven, in part, by the infrastructure demands of artificial intelligence. “Artificial intelligence needs a lot of cabling to develop all these huge servers operate, and the companies that build that power grid are the utility companies,” Müller explained. This highlights a connection between technological advancement and the demand for traditional energy infrastructure.

The firm also advises adding high-quality US investment-grade fixed income (bonds) with maturities of one to three years. They are considering incorporating fixed income from emerging market countries, particularly in Latin America. This diversification strategy aims to balance risk and potential returns in a volatile global environment. Further details on Peruvian market participants can be found on the Bolsa de Valores de Lima’s issuer details page.

Commodities and the Peruvian Context

BBVA is prioritizing commodities as an alternative asset class. This recommendation aligns with the broader impact of rising metal prices on the Peruvian economy. Müller noted, “The amount of silver entering Peru due to the prices of metals is enormous.” Peru is a significant global producer of silver and other metals, and rising commodity prices contribute substantially to its export revenue.

Despite the positive impact of metal prices, the BVL experienced a decline of nearly 3% yesterday. BBVA’s base-case scenario anticipates a short duration for the conflict in Iran, potentially lasting up to two months. This relatively limited timeframe informs their investment recommendations, but the potential for escalation remains a key consideration.

Shifting Investment Strategies

Comparing investment reports from March 2026 to the previous month, BBVA has adjusted its stance on Japanese equities, moving from an overweight position to a neutral one. Simultaneously, they have increased their weighting of commodities. This demonstrates a dynamic approach to asset allocation, responding to evolving geopolitical and economic conditions.

BBVA maintains a neutral outlook on Peruvian sol-denominated sovereign bonds, citing that interest rates remain attractive in both nominal and real terms. This suggests a continued belief in the stability of the Peruvian currency and debt market, despite global uncertainties.

What’s Next: Monitoring and Adjustment

The situation remains fluid, and BBVA’s recommendations are subject to change based on the evolving dynamics of the conflict in the Middle East and its impact on global markets. Investors should closely monitor developments in the region and be prepared to adjust their portfolios accordingly. Carlos Müller Jiskra, CFA, leads the investment strategy at BBVA Perú; his profile can be viewed on LinkedIn. The bank’s strategy emphasizes a tactical approach, leveraging opportunities presented by geopolitical events while mitigating potential risks. Continued assessment of commodity prices, energy market trends, and the overall macroeconomic environment will be crucial in navigating the current landscape. The firm will likely provide updated guidance as the situation unfolds, emphasizing a data-driven and adaptable investment strategy.

The emphasis on energy and cyclical sectors reflects a broader trend of investors seeking assets that can benefit from increased demand and potential inflationary pressures. The allocation to US fixed income and Latin American bonds aims to provide stability and diversification, while the focus on commodities capitalizes on the potential for rising prices driven by supply disruptions and increased demand. The success of these strategies will depend on the duration and intensity of the conflict in the Middle East and its broader impact on the global economy.