Global hedge funds are reviving investment strategies that were sidelined during the US-Iran conflict, as easing geopolitical tensions and falling oil prices reshape market expectations, according to a report by Bloomberg.
The peace agreement between Washington and Tehran, due to be formally signed this week, has prompted investors to reassess assets that had been under pressure during months of conflict that disrupted energy supplies and fuelled inflation fears.
Lower crude prices sparked gains across equity and bond markets on Monday, while the US dollar weakened as demand for traditional safe-haven assets faded.
Fund managers say the changing backdrop is creating opportunities across a diverse range of asset classes, including short-dated US Treasuries, Asian equities, emerging-market currencies and selected consumer sectors.
Thomas Hayes, chairman of Great Hill Capital, said investors are increasingly returning to the market themes that prevailed before the conflict erupted.
Among fixed-income investors, several hedge funds are favouring shorter-duration government debt. Grey Value Management and Singapore-based Reed Capital Partners are among those highlighting opportunities in shorter-dated US Treasuries, while some managers are also increasing exposure to the Japanese yen.
US government bonds rallied on Monday as falling energy prices led traders to scale back expectations for additional Federal Reserve tightening. Two-year Treasury yields fell to around 4.02%, while benchmark 10-year yields declined to roughly 4.43%.
Steven Grey, chief investment officer at Grey Value Management, said the current yield curve offers little incentive to extend duration or assume additional credit risk.
Currency markets are also being reassessed. As geopolitical risks recede, some hedge funds expect the US dollar to lose momentum, while the yen could benefit from improved sentiment and a potentially overvalued greenback.
Gerald Gan, chief investment officer at Reed Capital, said the firm has been increasing its exposure to Japan’s currency, citing favourable long-term fundamentals.
Asian markets, which were disproportionately affected by higher energy prices because of the region’s reliance on imported oil, may also stand to benefit from the easing of tensions.
Fund managers point to Southeast Asian equities in particular as potential beneficiaries after significant underperformance during the conflict. Equity markets in countries such as India and Indonesia have been among the weakest globally this year, while their currencies have fallen sharply.
Nick Ferres, chief investment officer at Vantage Point Asset Management, said unloved Southeast Asian markets may present opportunities for investors, although artificial intelligence remains the dominant structural investment theme.
Some investors are also revisiting sectors sensitive to commodity costs. Chauwei Yak, chief executive of GAO Capital, said companies exposed to agricultural inputs — including instant noodle manufacturers reliant on palm oil prices — could see improved prospects if energy markets stabilise.
Digital assets have also rebounded, with bitcoin recovering from recent lows amid improving risk appetite. However, crypto-focused investors remain cautious pending the formal completion of the peace process.
Richard Galvin, executive chairman of crypto investment firm DACM, said his firm recently deployed capital into cryptocurrency projects linked to artificial intelligence, while maintaining a measured stance until the agreement is finalised.
Despite the renewed optimism, many hedge funds remain selective, balancing opportunities created by lower energy prices against the possibility that geopolitical risks have not yet fully disappeared.
