Knight Asia Newsletter March 2026
Asian equity markets fell sharply in March, torpedoed by the Israeli/US attack on Iran, and consequent rise in oil & gas prices. The MSCI Asia Ex Japan dropped -13.9% (YTD -1.5%), the Thai SET TR Index (USD) -8.6% (YTD +13.2%), the MSCI AC ASEAN Index -8.5% (YTD -2.3%), and the Hang Seng Index was down -6.9% (YTD -3.3%). Thailand was one of the few markets in the World holding on to a gain YTD. The Thai market can be expected to rally strongly if the Gulf ceasefire holds, and be sustained for 12-24 months.
Asian markets all plummeted in March following the long awaited US Iran campaign. Iran’s counter-attacks to US bases in Gulf countries, and damage to energy infrastructure in Qatar was more than anticipated, and caused an immediate +50% spike in oil & gas prices, amplified as +100% increases in jet fuel & diesel prices. Iranian retaliatory attacks on shipping in the Straits of Hormuz was song threatened and expected, exacerbating the situation by making insurance rates jump, and ship operators deciding not to risk running the gauntlet with their crew. Fortunately, the threat by the Houthis to close the Red Sea southern straits has not yet materialised.
President Trump proudly announced achieving complete degradation of the Iranian military capability, but any hope of regime change was lost three months earlier in the widespread crackdown, with US support coming too late. The collateral damage to Gulf nations could not be tolerated by the countries in question, nor could the supply chain disruption and cost escalation worldwide. A swift end to the war is now essential. Trump then threatened to put Iran back to the stone-age, which in Persia’s case was 10,000 years ago, in the US about 400 !
Fortunately, a tenuous temporary ceasefire was agreed in the nick of time, although the Israelis continue carve out operations in South Lebanon. Negotiations are ongoing, facilitated by Pakistan. Depending on the terms of any final peace deal, we can expect both Israel and Iran’s influence to grow thereafter, as they divide the Gulf Region between their respective spheres of influence. Iran’s theocratic leadership may now be secondary to the IRGC, for better or worse remains to be seen; economically there may be some recovery if sanctions are halted. One condition might be for Iran to agree an oil offtake agreement with the US, priced in US$ nor CNY. With a US$ 1.5 trillion US defense budget being mooted, and QE secretly well underway, we can expected the US$ to resume its downward spiral post hostilities, and gold to resume its uptrend. …
Meanwhile, although one can’t say Asia is a winner in this conflict it can at least vie for safe-haven status. Japan, Vietnam, South Korea, & Philippines were most dependent on Gulf oil & gas supplies, with varying levels of strategic reserves (Japan best, Philippines worst). By comparison China is sitting pretty with less than 20% of electricity from (oil &) gas, and three months reserves of crude oil requirements. Corporate positioning also varies widely. For example, airlines’ fuel hedging seems to be focused on crude oil rather than jet fuel, and whereas US airlines are the least hedged, UK low cost carriers were most hedged. This time around, Thai Airways seems to be acting rationally, maintaining a 50% forward hedge for six months. Thai tourism is holding up well, with Asian regional travellers substituting for a drop in European travellers via Dubai/Qatar.
Liquidity in Asia remains strong and governments are capable of cushioning short-term impacts of the energy crisis. Wealthy families and governments continue to repatriate money from the US tech bubble. This will likely accelerate as disillusionment spreads with regards to US activities both military and in trade. Most Asian countries have interest rates far below the US and EU, so the returning liquidity may eventually power the stock market where share yields are either double or triple that of bonds, and 10x that of bank deposit rates.
The new Thai government coalition has been formed, and cabinet positions filled, but is already facing the unexpected challenge of energy crisis. For the time being the Thai government is subsidizing all aspects of energy; but also needs to incentivize energy conservation. Reactive as ever, sustainable energy is being mooted in Thailand now, decades too late. Thai tourist arrivals were up +2% in March 2026 vs March 2025, including a +47% surge in Chinese visitors to Phuket.
In Myanmar, Gen Min Aung Liang has been chosen as President by the new Parliament, with USDP Chairman U Khin Yi elected Speaker of the Lower House. Possibly enjoying the support of Senior General Than Shwe, it remains to be seen if Khin Yi can emerge as the new Thein Sein (reformist President 2010-2015).
With Best Wishes
JEREMY