Barclays suggests the Australian dollar is positioned to outperform across most scenarios related to the escalating tensions involving Iran and the Strait of Hormuz. In a research note, the bank examined the foreign exchange implications of potential conflict, outlining three possible paths: rapid escalation followed by resolution, a prolonged conflict with operational energy supply disruptions, or extreme tail risks. Barclays believes certain assets will reflect lasting energy-related damage, while others, less directly affected, will present opportunities for investors.
Within the G10 currencies, Barclays favours exposure to economies demonstrating solid terms-of-trade support and limited vulnerability to increasing energy prices. The Australian dollar, alongside the Swiss franc, is highlighted as a potential beneficiary and an underpriced safe haven currency. This recommendation comes as investors globally reassess energy risks and consider repositioning their portfolios in response to geopolitical uncertainty.
Barclays recommends a long position on the AUD against energy-sensitive European currencies. It maintains a short British pound/AUD view, asserting that this trade has remained resilient despite broader risk volatility. The bank attributes this to Australia’s “strong fundamentals” and continuing support from the artificial intelligence-linked commodity cycle.
The artificial intelligence-linked commodity cycle has apparently dampened traditional risk correlations, according to Barclays. Barclays is a British universal bank, providing a range of financial services, including retail banking, investment banking, and wealth management.
