Morgan Stanley has become more cautious about Asian stocks, cutting its India position as geopolitical risks rise. Daniel Blake and Jonathan Garner warned that Middle Eastern oil disruptions could impact Asia's energy supply, making India particularly vulnerable due to its reliance on Qatari LNG. The firm downgraded India from overweight to equal-weight, citing both supply chain risks and high valuations amid AI uncertainty. Global investors are already pulling money from emerging Asia, with India seeing $1.3 billion outflows since the Iran conflict began.

Prolonged Strait of Hormuz disruption could raise oil and LNG prices, pressuring energy-importing Asian economies and potentially triggering earnings downgrades. Morgan Stanley's move underscores mounting concerns that sustained supply shocks might spark a global economic slowdown, particularly affecting export-reliant nations. The strategists believe investors may delay returning to India until tech cycles in South Korea and Taiwan peak.

Morgan Stanley's cautious stance highlights how the Iran war is reshaping energy flows and risk premiums. The firm's India downgrade reflects specific concerns about Qatari LNG supply vulnerabilities and broader market complacency about supply chain risks in Asia's most exposed markets.