The local stock market is expected to remain bearish this week due to the ongoing conflict in the Middle East and its impact on oil prices and the peso, while investors will also keep an eye on remittances from overseas Filipinos (OFs) last January.

“Investors are expected to monitor the developments on the said war. Clear signs that the conflict is nearing its end is expected to boost investors sentiment. However, lack of such is expected to keep weighing on the bourse,” said Japhet Tantiangco, research manager at Philstocks Financial Inc.

He added that a further rise in oil prices and depreciation of the peso are also expected to drag the local market.

Online brokerage 2TradeAsia.com said that while the initial timeline that United States (US) officials gave for the war in Iran was four to six weeks, crude’s recent surge toward the $120-a-barrel level is stoking fears of a prolonged inflationary regime for most of the world, with Asia more vulnerable as the most oil-importing region.

With high oil prices, the brokerage said it expects any meaningful easing of interest rates by the Federal Reserve (US Fed) to be pushed back much later in the year as inflation and price shocks remain a material threat to policy.

On the local front, the Bangko Sentral ng Pilipinas (BSP) also faces pressure amid rising inflation and the proximity to the end of its rate-easing cycle.

“As a net oil importer, the Philippines faces amplified double impacts (higher landed costs plus peso weakness), potentially pushing headline inflation above four percent in coming months and testing the BSP’s tolerance band,” 2TradeAsia.com said.

It noted that high oil prices have already affected consumption, underscoring the need for substantial fiscal measures such as subsidies, targeted transfers, or excise adjustments to mitigate the pass-through.

Meanwhile, corporations are expected to defer hiring and expansion decisions, which is already reflected in investor appetite.

The brokerage advised investors to focus on quality defensives and selective commodity-linked plays while monitoring fiscal responses for domestic stabilization cues.

For stock picks, COL Financial Group Inc. has a BUY rating for tycoon Enrique K. Razon-led International Container Terminal Services Inc. (ICTSI) because of earnings forecast upgrade despite the closure of its port in Iraq due to the war in the Middle East.

The upgrade in estimates accounts for continued expansion and efficiency gains from ICTSI’s newly acquired and existing terminals, as well as improvements in port operations resulting in capacity expansion and cost mitigation.

COL also has a BUY rating for Aboitiz Equity Ventures (AEV), given the prospects of its power subsidiary Aboitiz Power Corp. (AboitizPower). AEV is also well positioned to benefit from the country’s growing sectors such as airports.