Inflation : how to protect yourself ?

Since 28 February, the world has been facing a major new conflict in the Middle East. The United States and Israel attacked Iran, an event that has dominated international news for several weeks. This geopolitical escalation immediately triggered a surge in oil prices: Brent crude exceeded $100 per barrel in March, reaching a peak of $120 per barrel at the end of the month.

In the night of 7 to 8 April, Donald Trump announced a two-week armistice. This declaration brought immediate relief to oil markets, with a drop of around 16%, bringing the price per barrel back below $100.

An energy shock with global repercussions

Despite these more reassuring signals, tensions in the Middle East have revived a well-known concern among investors: the risk of an energy shock capable of reigniting inflation.

It is worth recalling that approximately one fifth of the world’s oil and liquefied natural gas (LNG) production passes through the Strait of Hormuz. The strait remained blocked long enough to significantly disrupt global energy flows. Gulf exporters were repeatedly targeted, directly affecting their production capacities. Qatar was even forced to temporarily suspend its LNG production. The normalisation of energy flows will still take time.

These events have had a major impact not only on the energy market, but also on sectors heavily dependent on energy or whose supply chains run through the region. Notable examples include the production and transport of fertilisers — essential to global food supply — as well as economies highly reliant on energy imports from the region, such as South Korea, where a sustained rise in oil prices could significantly increase production costs in strategic sectors such as semiconductors.

Inflation : a structural risk, not just a cyclical one

Historically, a rise in oil prices is one of the main triggers of inflationary surges — as was seen most recently in 2022, when inflation reached a record high of over 10% in October, in the wake of Russia’s invasion of Ukraine.

Beyond one-off shocks, our highly integrated economies, supported by tightly interconnected global supply chains, are proving increasingly vulnerable to geopolitical tensions. While these interconnections have brought undeniable economic benefits, they have also exposed certain fragilities over the past decade.

Several events illustrate this clearly: the US-China trade war in 2018, the COVID-19 pandemic followed by the saturation and disruption of global logistics chains, Russia’s invasion of Ukraine in 2022, and more recently the persistent tensions and conflicts in the Middle East.

Our approach to protecting purchasing power

These events make it clear that protecting against inflation in order to preserve purchasing power has become essential. It is a central and enduring theme, to which we attach particular importance at CapitalatWork.

We remain convinced that, over the long term, equity investment is one of the most effective ways to combat inflation — particularly when the portfolio is built around quality companies with strong pricing power, enabling them to pass on cost increases to their clients without significantly eroding their margins. This capability is one of the key criteria in our investment philosophy, alongside other fundamental qualitative and quantitative factors.

That said, this focus on quality must be combined with a rigorous and regular analysis of portfolio valuations, adapting allocations where necessary and targeting attractive long-term returns.

For more defensive investor profiles, diversification incorporating bond exposure helps mitigate volatility. In particular, exposure to commodity-linked currencies such as the Norwegian krone and the Australian dollar has helped offset recent temporary losses on bonds.

Our significant positioning in inflation-linked bonds has also proved particularly beneficial in this environment. These instruments, whose principal and/or coupons are adjusted in line with inflation, help preserve

Investing : a marathon

Investing is not a sprint, but a marathon. We remain convinced that confidence in the fundamental quality of companies — grounded in their ability to generate sustainable cash flows — combined with a disciplined, long-term investment philosophy, provides a solid foundation for navigating periods of turbulence.

This approach has stood the test of time and remains, in our view, one of the most effective ways to stay on course and durably protect wealth against inflation.