Global Opportunities
Portfolio

The Iran Conflict: A Structural Shock to Global Energy Markets

The single most consequential event of Q1 2026 was the commencement of the US–Israeli joint military strike against Iran on 28 February 2026 and the subsequent Iranian closure of the Strait of Hormuz. The Strait is the world's most critical energy chokepoint, through which approximately one-fifth of global petroleum consumption and significant LNG volumes normally transit. Its effective closure represented an unprecedented supply disruption that the IEA characterised as the largest in the history of the global oil market.

By late March, Brent crude had surged approximately 57% for the month alone, the strongest monthly gain since the 1970s, with highs near $119.50 per barrel. European gas storage, already at a critically low 30% following a harsh winter, became a front-page policy emergency as Qatar Energy declared Force Majeure on LNG contracts and Dutch TTF gas benchmarks nearly doubled to over €60/MWh. J.P. Morgan modelled that sustained elevated prices could depress global GDP growth by approximately 0.6% annualised while pushing global CPI more than 1% above target.

Global Markets: Equity Losses, Commodity Surge, Rate Pressure

US equities declined materially in Q1 2026, with the S&P 500 falling 4.4% and the Nasdaq-100 declining 5.8%. March was a month of rare and broad-based de-risking, the S&P 500 Equal Weight Index fell 6%, with both growth and value declining, underscoring that the selloff was a macro shock response rather than a style rotation. The US 10-year yield climbed 38 basis points to 4.32%; the German Bund 10-year surged 55 basis points to 3.00%, its highest since May 2011; and Japan's 10-year JGB rose 79 basis points to 2.39%, its highest since July 1997.

AI Infrastructure: The Power Constraint Era Begins

Separate to the geopolitical shock, Q1 2026 marked a structural inflection point for AI infrastructure. The quarter confirmed that AI development is no longer constrained by capital or compute demand, it is constrained by reliable, dispatchable power. Amazon announced over $200 billion in planned capex. Meta aligned with nuclear energy providers. Google raised $32 billion via debt markets to fund AI infrastructure. Data centres now account for over 70% of new large-load interconnection requests to US regional grid operators. McKinsey & Company has estimated that global AI-powered data centre infrastructure capex will reach approximately $7 trillion by 2030.

Cross-Asset Market Review — Q1 2026

Performance Summary — AUD Returns to 31 March 2026

Performance is net of fees. Based on the aggregation of all managed accounts. Individual account performance may vary.

Growth of $100,000. Approximate inception NAV series used for illustrative purposes.

The Global Opportunities Portfolio maintains a high-conviction, actively managed approach across 30–40 positions, dynamically allocated across North America, Europe/UK, and Asia-Pacific. Each regional sub-portfolio (North America, AI Infrastructure, EU/UK, and Asia-Pacific Japan) contributes a 25% allocation, creating a diversified yet thematically cohesive global structure centred on the structural convergence of AI infrastructure capital expenditure and the energy transition.

Thematic Snapshot — Q1 2026

The derivatives overlay continues to serve as a core risk management tool. In a negative gamma market environment, characterised by elevated put/call wall positioning and a zero-gamma flip well below prevailing equity prices, the options book has provided meaningful asymmetric exposure — contributing to outperformance during volatile periods including the sharp Q1 drawdown in March.

Total equity sleeve: 71.0% of portfolio. Cash & other: 29.0%.

Sector Allocation by Sub-Portfolio (Global Weight %)

Global weight % = sub-portfolio holding weight × 25% allocation to Global Opportunities.

Emit Capital's core investment thesis — the structural convergence of AI infrastructure capital expenditure and the energy transition — has been validated and accelerated by Q1 2026 events. The Iran conflict has added an important reinforcing dimension: energy security as a geopolitical imperative that amplifies the existing structural investment cycles.

The global sovereign bond market experienced one of its most turbulent quarters in years during Q1 2026, as the Iran conflict transformed the macroeconomic landscape for fixed income investors almost overnight. The defining narrative shifted from 'how many rate cuts in 2026?' to 'how do we prevent stagflation?' The stagflation risk — where higher oil prices slow growth while simultaneously preventing rate cuts — is the tail risk that bond markets are now pricing.

Key Yield Levels — 31 March 2026

Yield levels as at 31 March 2026. Q1 change for 10Y tenor. Sources: US Treasury, Tradingeconomics.com, Bank of Japan.

The Iran conflict and the associated Strait of Hormuz closure delivered a supply-side inflation shock of a magnitude not witnessed since the 1970s energy crises. At the start of Q1, all three central banks were operating in broadly accommodative or neutral mode. By quarter-end, the message from bond markets was unanimous: the era of abundant, cheap policy accommodation that characterised 2024 and much of 2025 is over, replaced by a regime of higher-for-longer nominal rates in the face of structurally elevated energy costs.

For the types of assets held in the Global Opportunities Portfolio — companies with structural pricing power, essential infrastructure roles, long-term contracted revenue streams, and direct exposure to the energy security imperative — the bond market repricing creates a more nuanced environment. The portfolio's nuclear and grid infrastructure holdings benefit from long-term contracted cash flows largely insulated from short-term rate moves, while energy transition capex is accelerated rather than deferred by the energy security crisis driving rates higher.

For individual sub-portfolio reports and full holdings disclosure, visit emitcapitalam.com.

As we enter Q2 2026, markets remain highly sensitive to three primary variables: the trajectory of the Iran conflict and Strait of Hormuz access; the pace and magnitude of central bank policy adjustment in response to the oil-driven inflation shock; and the continued maturation of AI infrastructure demand translating into earnings for grid, nuclear, and power equipment companies.

• Maintain and build nuclear and grid infrastructure exposure. GE Vernova remains the portfolio's largest holding, and the convergence of AI power demand and energy security provides a multi-year earnings growth runway. We continue to favour companies with locked-in hyperscaler PPAs and strong construction visibility.
• Deepen AI Infrastructure sub-portfolio selectively. Marvell Technology was a top contributor in Q1. We continue to identify semiconductor and AI enablement companies exposed to the data centre power and compute build-out that have not yet fully re-rated.
• Add to energy transition on dislocation. The Iran shock has reinforced the long-term investment case for electrification and distributed clean energy. RWE and Centrica demonstrated resilience in Q1 and we will add to high-quality grid and renewable positions on market weakness.
• Monitor bond market dynamics as a duration and positioning signal. With the Fed, ECB and BoJ all pivoting hawkishly, rising real rates create both headwinds (valuation compression for growth) and tailwinds (validation of hard-asset, contracted-cash-flow businesses). The options book will be used to hedge duration risk.
• Monitor Asia-Pacific energy transition opportunities. Japan's accelerated strategic reserve deployment and regional AI infrastructure commitments create selective opportunities in regional energy infrastructure and utilities within the Asia-Pacific Japan sub-portfolio.

The structural themes underpinning the Global Opportunities Portfolio — the AI infrastructure supercycle and the energy transition as both economic necessity and security imperative — are not short-term market phenomena. They represent decade-long capital allocation cycles driven by the physical realities of power demand and network infrastructure. Emit Capital's portfolio is constructed to be a direct beneficiary of each of these cycles, with active risk management designed to navigate the inevitable volatility that accompanies them.