On this three-day trading week, the local stock market is seen to remain bearish due to the impact of the Middle East conflict on inflation and supply, while investors are also expected to hold on to cash heading into the long Lenten break amid these uncertainties.

“The local market is still expected to have a bearish default due to rising inflation expectations amid the uncertainties of the United States (US)/Israel-Iran war. Investors are also expected to trade cautiously ahead of the long weekend,” said Philstocks Financial Inc. research manager Japhet Tantiangco.

He noted that, “The elevated oil prices and the weak position of the peso are expected to continue weighing on market sentiment. Investors are also expected to monitor further developments in the conflict in the Middle East.”

Online brokerage 2TradeAsia.com said the reality of active hostilities and rejected counterproposals keeps a massive risk premium embedded in crude, which implies de-anchored inflation expectations and crippled supply chains.

“For capital markets, this translates to a sustained ‘risk-off’ environment: sovereign yields are facing upward pressure as markets brace for a stagflationary shock, while the US dollar remains the primary beneficiary of a flight to safety,” it noted.

The protracted closure of the world’s most vital oil artery suggests that higher-for-longer terminal rates may be the only tool left for central banks to combat the second-round effects of an energy price spike.

“This is a week for discipline and a season for introspection, heading into a low-liquidity week amid the Lenten break. Focus on companies with the pricing power to weather rising input costs and the balance sheet strength to survive a high-rate, low-consumer confidence environment,” 2TradeAsia.com advised.

For stock picks, Unicapital Securities Inc. head of research Wendy Estacio-Cruz said banks may benefit if the Bangko Sentral ng Pilipinas (BSP) decides to hike interest rates to tame inflation.

“Banking might outperform over the next couple of quarters, given that their margins will be protected somehow,” she said, adding that after Russia started the war in Ukraine, only the financial sector gained by seven percent while all other sectors, even the Philippine Stock Exchange index (PSEi), were down.

She said defensive stocks are also good hedges during crises, such as utilities like power and water, and commodity-driven stocks such as mining due to rising prices of gold and other metals.

Abacus Securities Corp. has a BUY rating on SP New Energy Corp. (SPNEC), as the first phase of its massive Terra Solar project will be fully operational by August and will deliver 850 megawatts (MW) by the first quarter of 2027, after its smaller second phase also comes online.