Local stocks are poised to remain under pressure as an escalating conflict in the Middle East—labeled by analysts as the decade’s second “Black Swan” event—threatens to offset attractive local valuations.

The benchmark Philippine Stock Exchange index (PSEi) is struggling to maintain its footing after the Covid-19 pandemic previously derailed its growth trajectory. The current crisis in the Gulf has shifted from a regional friction to a systemic threat to the global energy complex, according to online brokerage 2TradeAsia.com.

Direct strikes on critical oil and liquefied natural gas infrastructure have widened the Brent-WTI spread, signaling deepening scarcity in physical markets and fueling fears of a synchronized global recession.

While the PSEi is trading at a price-to-earnings ratio of about 10.1 times—well below its five-year historical average of 14.4 times—the “bargain” levels have yet to entice a broad recovery. Japhet Tantiangco, research manager at Philstocks Financial, said the market maintains a bearish bias as elevated crude prices and a weakening peso continue to cloud the inflation outlook. The peso recently hit a record low, closing at 60.10 against the US dollar, further straining manufacturing margins and consumer sentiment.

The brokerage 2TradeAsia.com noted that unlike the 2020 pandemic, where a medical breakthrough provided the ultimate catalyst, the current “war of attrition” requires a clear signal of geopolitical de-escalation for markets to rebound. In the interim, the narrative of “higher-for-longer” interest rates is being replaced by a “lower-for-certain” outlook as central banks move to hedge against a prolonged conflict.

Investors are being advised to prioritize liquidity and defensive, high-yield stocks as the market prepares for potential stagflation. Despite the overarching gloom, some end-of-quarter window-dressing is expected in the final full trading week before the Lenten break.

In equity-specific news, COL Financial maintained a BUY rating for Ayala Corp., citing the conglomerate's progress in optimizing its portfolio and improving capital allocation across its subsidiaries. Management’s focus on parent-level efficiency and higher dividend payouts is expected to bolster shareholder returns.

The brokerage also reaffirmed its BUY rating for RL Commercial REIT Corp. (RCR), adjusting its estimates upward to reflect revenue contributions from newly acquired assets. RCR currently offers a projected dividend yield of 6.7 percent and benefits from index fund participation following its inclusion in the PSEi.