Muzinich weekly market comment: The Long Game

April 27, 2026

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Markets navigated a complex backdrop, as a fragile Middle East ceasefire and ongoing Strait of Hormuz disruption kept energy prices elevated and investors cautious. With inflation risks resurfacing, rate expectations shifting and growth signals diverging globally, the environment reinforces the importance of maintaining a long-term perspective amid short-term uncertainty.

It was a mixed week for investors, as geopolitical tensions in the Middle East appear to have reached a temporary impasse. The good news is that a fragile military ceasefire seems to be holding, with no formal deadline currently set involving Iran. Meanwhile, the ceasefire between Israel and Lebanon has been extended by a further three weeks into May.

Unfortunately, the Strait of Hormuz is still closed to all traffic, with Iran continuing to block the passage of international vessels and the US responding in kind by restricting Iranian shipping, leaving a key global shipping route effectively shut and keeping markets on edge.

Against this backdrop, the US administration has sought to frame its intensified naval blockade as a strategic success, arguing that sustained pressure will accelerate efforts to bring Tehran back to the negotiating table and ultimately secure a comprehensive agreement. Yet market pricing tells a more cautious story: Brent crude oil has risen steadily throughout the week, gaining more than 15%, suggesting investors remain unconvinced.

The price action of Brent is reinforced by the underlying oil dynamics of Iran. Iran’s onshore storage capacity is estimated to be 54% full, providing room for roughly 22 days of exports. Even when accounting for floating storage, production would likely need to be curtailed after approximately 16 days of continued disruption, with a full export shutdown occurring after around 30 days if the Strait remains closed. At the same time, Iran is estimated to have roughly 142 million barrels positioned offshore beyond the Arabian and Omani Gulf regions, and therefore outside the immediate reach of a Strait-focused blockade.1 

Taken together, these factors suggest that while the blockade does provide negotiating leverage, its effectiveness is highly time dependent. To materially constrain Iran’s export capacity, enforcement would need to be both strict and sustained over several months. This creates tension as such a prolonged timeline may test the patience of a US administration seeking faster results, while also challenging investor assumptions that the disruption will remain a short-term inflationary shock with limited spillover into broader economic growth. Under our oil supply shock framework, Brent crude is expected to trade in a range of US$82–US$98, assuming the Strait reopens within three months. A more prolonged, six-month disruption would push that range higher, to approximately US$104-US$136.2 

In fixed income markets, government bonds responded with their curves bear-flattening, front end yields underperforming, and 2-year yields in the US and Germany rising more than 10 basis points (bps), while 2-year yields in the UK rose greater than 20bps. Meanwhile, credit markets moved sideways, eking out a positive return from coupon carry. Economists are now scouring data for tell-tale signs of inflation, sentiment and economic growth effects from the elevated energy prices and ongoing geopolitical tension.

In Asia, Japan’s consumer price data was mixed, with headline inflation rising above consensus at 1.5%, driven by higher petroleum prices and a weak yen. At the same time, core inflation excluding energy and food eased to 2.4% in March,3 its lowest level since October 2024, pointing to steady-to-softening underlying price pressures.   As for activity, preliminary April PMIs were similarly mixed, with manufacturing activity accelerating further into expansionary territory, while services moderated but remained in expansion. Meanwhile, South Korea's economy delivered a standout surprise, growing 1.7% quarter-over-quarter in Q1 versus a 0.9% consensus and reversing the prior quarter’s 0.2% contraction, supported by an AI-driven export boom.4

Economic data in Europe presented a broadly similar picture to Asia. In the UK, headline inflation rose to 3.3% from 3.0%, a move largely attributed to the Middle East conflict and higher fuel prices, while core inflation eased to 3.1% from 3.2%, coming in slightly below consensus expectations that it would remain unchanged, suggesting some moderation in underlying price pressures.5 In the eurozone, the first warning sign of a slowdown in growth came from the April flash PMI release, which showed an unexpected deterioration in activity at the start of Q2, with the composite index slipping into contraction territory at 48.6, down from 50.7 in March. As in Japan, the weakness was concentrated in services, where the index fell to 47.4 from 50.2, while manufacturing edged higher to 52.2 from 51.6.6  

This global divergence between manufacturing and service PMIs may indicate that consumers are beginning to scale back discretionary services spending, while manufacturing remains temporarily supported by stockpiling effects. Sentiment indicators out of Germany reinforce this view, with investor sentiment measured by the ZEW survey falling to its lowest level in more than three years,7 while business confidence in the IFO survey also weakened, with the IFO business climate index declining to 84.4 in April from 86.3 in March, marking its lowest level since May 2020.8 

In the US, it was a relatively data-light week, with retail sales as the only notable release. The report suggests consumer spending remained solid and broad-based in March, with 12 of 13 retail categories increasing. This likely reflects the larger-than-usual tax refunds flowing into households’ bank accounts. However, a notable warning sign is clear from the breakdown of the headline retail index where gains were largely driven by higher gasoline prices (see Chart 1 of the Week).9 As a result, investors shifted their focus towards incoming Federal Reserve Chair, Kevin Warsh’s Senate testimony and to first-quarter earnings releases.

From his testimony, Warsh outlined an ambitious agenda for his chairmanship. He reaffirmed the primacy of the Fed’s core objectives: price stability and maximum employment, while signalling far less tolerance for what he described as “mission creep”. He argued that interest rates, rather than the balance sheet, should be the primary tool of monetary policy, implying a preference to reduce the Federal Reserve’s balance sheet over time. Warsh also called for a fundamental overhaul of how the committee measures and targets inflation, including a move away from forward guidance and, in particular, the dot plot, potentially adopting an approach followed by the European Central Bank, which publishes quarterly economic forecasts with alternative scenarios to better illustrate its reaction function. At the same time, he emphasized the growing importance of artificial intelligence in shaping the future direction of policy and forecasts, arguing that its cascading effects on productivity and output are too significant to ignore.10

Warsh must have had one eye on Q1 earnings, as the key takeaway so far has been a renewed surge in optimism – perhaps even outright euphoria – across the technology sector. Blowout results have driven a broad-based rally in tech shares, with the Semiconductor Index (SOX) extending an unprecedented 18-day winning streak. Globally, tech-heavy equity indices have outperformed, with strong gains in Taiwan and South Korea among emerging markets, and with US equities – led by the Nasdaq, which closed the week higher – outpacing other advanced economies. There is a growing consensus that the sector remains largely insulated from spillover risks stemming from the Iran conflict. Standout results include SK Hynix, which reported a 398% surge in first-quarter net profit to a record 40.35 trillion (US$27.28 billion),11 driven by a memory-chip shortage, while Intel delivered a blockbuster sales forecast, and Texas Instruments posted Q1 revenue of US$4.8 billion, with data centre revenue up 90%.12 In Taipei, Taiwan Semiconductor Manufacturing Company (TSMC) rose 5% after regulators eased limits on single-stock fund holdings,13 further supporting the bullish momentum.

Chart(s) of the week: Losers and winners from the Iran conflict

Affected: Loser – consumer: gas station prices

Source: US Census Bureau, Advance Monthly Retail Trade Survey, April 21 2026. For illustrative purposes only.

Not affected: – Winner: semiconductor industry

Source: Bloomberg as of April 24, 2026. PHLX Semiconductor Sector Index (SOX). For illustrative purposes only.

All sources are Bloomberg unless otherwise stated.

Past performance is not a reliable indicator of current or future results.

References

1. Bloomberg, “US Navy Blockade Will Force Iran to Curtail Production: JPM,” April 21, 2026
2. Muzinich & Co., “Muzinich Weekly Market Comment: Energy Shock,” March 16, 2026
3. Bloomberg, “JAPAN REACT: Hot CPI Shows Oil Shock Wave, BoJ to Stay Alert,” April 23, 2026
4. Bloomberg, “KOREA REACT: 1Q Surprise Puts 2026 Growth on a Faster Track,” April 22, 2026
5. Bloomberg, “UK REACT: CPI Jump Fueled by Oil Rise, BoE Unlikely to Budge,” April 22, 2026
6. S&P Global Flash Eurozone PMI, “Eurozone output falls for first time in 16 months as prices surge higher,” April 23, 2026
7. Bloomberg, “German Investor Outlook Drops to Worst Since 2022 on Iran War, April 21, 2026
8. Bloomberg, “GERMANY REACT: Weak Sentiment Points to 2Q Contraction Risk,” April 24, 2026
9. Bloomberg, “US REACT: Costly Gas and Tax Refunds Drive March Retail Sales,” April 21, 2026
10. Wall Street Journal, “Key Moments from Kevin Warsh’s Congressional Testimony,” April 21, 2026
11. Barron’s, “SK Hynix Posts 400% Profit Rise. Micron Stock is Falling.” April 23, 2026
12. Bloomberg, “Texas Instruments Rises the Most Since 2000 on Rosy Forecast,” April 23, 2026
13. Bloomberg, “TSMC Shares Surge as Taiwan Eases Single Stock Investment Cap,” April 23, 2026

References to specific companies is for illustrative purposes only and does not reflect the holdings of any specific past or current portfolio or account.

This material is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed by Muzinich & Co. are as of April 27 2026 and may change without notice.

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Index descriptions

Philadelphia Stock Exchange Semiconductor Index (SOX) -The Philadelphia Semiconductor Index is a modified capitalization-weighted index comprised of companies that are involved in the  design, distribution, manufacturing, and sale of semiconductors.

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