With the deadlock in the Strait of Hormuz refusing to break, should investors adapt their strategy for a sustained period of high inflation on Wall Street?



The conflict in Iran has remained a fast-moving news story in recent weeks, but the same can't be said for one of the world's busiest shipping lanes. The Strait of Hormuz has been responsible for the passage of 20% of the global supply of the seaborne oil trade, and its prolonged closure has had a severe impact on inflation forecasts in the US. 



With headline annual inflation climbing to 3.8% in April, traders on prediction market Kalshi have factored in the prospect of a rise to beyond 5% at a 40% chance. The move would see the highest rate of inflation since February 2023. 



Vanguard has offered a calmer prediction of 2.8% in recent days but also acknowledges that a prolonged war in the Middle East would make it ‘difficult' for inflation to move below 3%. 



Could inflation impact Wall Street for longer than expected as a result of geopolitical uncertainty? Let's take a look at how investors can navigate markets should rates continue to rise: 



<h2>High Inflation Means Rate Hikes</h2>



One of the biggest factors investors should keep in mind is that inflation invariably leads to Fed rate hikes. This is because taking measures to slow borrowing can help calm spending and slow the rising cost of living. 



Following the announcement of higher-than-expected inflation figures in April, market traders priced in a 37% probability of a rate hike before the end of 2026. The likelihood of a Federal Reserve intervention will boil down to energy costs and whether soaring oil prices can be calmed. 



For investors, a prospective rate hike will directly impact high-tech stocks like the S&amp;P 500's Magnificent Seven. This will be down to increases in the cost of borrowing, which could adversely impact more speculative stocks. 



High inflation is nothing new in the United States, and the S&amp;P 500 closed out 2022 with a total return of -18.11% as rates peaked at 9.1% in June. The performance of the index paved the way for its worst year since the financial crisis of 2008. 



What does this mean for investors? Preparing for high inflation rates should involve buying stocks that have some resilience in the face of interest rate hikes, and factoring in cyclical options could offer long-term strength should the conflict in the Middle East continue to impact markets. 



<h2>Opportunities in Construction</h2>



One sector that may offer more resilience over the coming years is construction, which is set to benefit from the Trump administration’s protectionist policies and efforts to reshore supply chains. 



Megaprojects in the US totaled $197 billion in 2025, representing the fourth consecutive year of growth for construction projects worth more than one billion dollars. 



This is likely to see more opportunities for growth among leading construction stocks like Caterpillar (NYSE:CAT) and Vulcan Materials (NYSE:VMC), both of which are likely to see demand for their products grow as more firms look to switch to domestic supply chains. 



The construction industry is also likely to see more growth as it continues to embrace emerging technologies for more accuracy and fewer overruns, with AI and centralized project management systems driving far greater efficiency for an industry that's struggled to embrace digital transformation. 



<h2>Strength in Consumer Staples</h2>



Periods of high inflation can make it far more difficult for investors to grow their portfolios, but finding resilient stocks with high economic moats in the form of brand loyalty can help to ensure steady revenue streams that can support bottom lines. 



Companies that have a loyal customer base, like Church &amp; Dwight (NYSE:CHD) and McCormick &amp; Company (NYSE:MKC), may find themselves better positioned to raise their prices in line with inflation while avoiding losses in consumer demand. 



Given that the geopolitical uncertainty in the Middle East has been driven by an energy squeeze, there's also plenty of opportunity when it comes to utilities stocks like Devon Energy (NYSE:DVN), which may also benefit from increased demand to support the powering of AI data centers. 



<h2>Overcoming Inflation Stresses</h2>



You only have to look to 2022 to see how high inflation can hamper growth on Wall Street, but this doesn't have to mean that there aren't opportunities to navigate the uncertainty effectively. 



Another thing to keep in mind is that the S&amp;P 500 was quick to recover from its post-pandemic downturn and soar to new record highs. This means that repurposing your portfolio rather than selling up can be a great way to manage your wealth. 



By looking to stocks that are characterized by their resilience, it's far easier to brace yourself for a period of high inflation and it can be a great measure to protect yourself against the prospect of a prolonged period of disruption in the Strait of Hormuz.



Disclosure: On the date of publication, Dmytro Spilka did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer. Dmytro Spilka does not intend to make a trade in any of the securities mentioned above in the next 72 hours.



Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.

COST

The ongoing conflict in the Strait of Hormuz is raising concerns about sustained high inflation, with predictions of a potential rise to over 5%. Investors are advised to adapt their strategies, focusing on resilient sectors like construction and consumer staples. High inflation typically leads to Federal Reserve rate hikes, impacting high-tech stocks. Opportunities may arise in construction due to protectionist policies and domestic supply chain shifts. Companies with strong brand loyalty, such as Church & Dwight and McCormick, are better positioned to manage price increases. Overall, navigating inflation requires strategic portfolio adjustments.

Stocks For Navigating Inflation Stress