Financial services giant Morgan Stanley has downgraded global equities, while upgrading cash and US government bonds, amid investors preferring safe-haven assets due to mounting uncertainty stemming from the ongoing Middle East conflict.
The Wall Street brokerage, as per the reports, has cut its rating on global equities to “equal weight” from “overweight”, while raising US Treasuries and cash to “overweight” from “equal weight.”
“Uncertainty around magnitude and duration of oil supply disruption means outcomes for risk assets have become increasingly asymmetrical,” Morgan Stanley strategists said.
Brent has soared 59% in March 2026, its steepest monthly jump, even exceeding gains seen during the 1990 Gulf War, as the Strait of Hormuz remains choked, affecting the flow of 20%–25% of global seaborne oil and 20% of LNG trade. Futures have already climbed above USD 116 a barrel.
The brokerage warned that if oil prices stay at around USD 150-USD 180 per barrel, global equity valuations could shrink nearly 25%. It has also trimmed its overall equity exposure through a downgrade in the United States, apart from terming Japanese stocks to “equal weight” from “overweight.”
“We turn equal weight on Japanese stocks given negative tail risks as we expect them to come under pressure from supply chains and global recessionary impacts in a scenario where the Strait of Hormuz remains closed for longer,” Morgan Stanley strategists said, while advocating a preference for American stocks compared to other regions, given higher earnings-per-share growth.
In 2025, investors shunned their United States-based assets due to tariff-related uncertainties and ended up rotating cash to European, Japanese and emerging markets.
However, in 2026, there has been a behavioural shift, about which Morgan Stanley stated, “Fund flows to US equities and bonds have overtaken the rest of the world since the Middle East conflict began last month, with investors looking to US assets as a more defensive market again.”
“In an oil supply shock, US Treasuries offer better diversification as the country is less energy import-dependent than Europe,” the venture concluded.