Morgan Stanley downgraded global equities and upgraded cash and U.S. government bonds, as investors shun risk in ​favor of safe-haven ⁠assets due to mounting uncertainty stemming from the Middle East ‌war.

The Wall Street brokerage cut its rating on global equities to "equal weight" from "overweight", while ​raising U.S. Treasuries and cash to "overweight" from "equal weight."

"Uncertainty around magnitude and duration of oil ​supply disruption means outcomes ​for risk assets have become increasingly asymmetrical," Morgan Stanley strategists said in a note on Friday. 

Brent has soared 59% this month, ⁠its steepest monthly jump, exceeding gains seen during the 1990 Gulf War. Futures climbed above $116 a barrel on Monday.

The brokerage warned that if oil prices stay at around $150-$180 per barrel, global equity valuations could shrink nearly 25%.

The ​firm has ‌trimmed its overall ⁠equity exposure ⁠through a downgrade in U.S. and Japanese stocks to "equal weight" from "overweight".

"We turn equal weight ​on Japanese stocks given negative tail risks as we ‌expect it to come under pressure from ⁠supply chains and global recessionary impacts in a scenario where the Strait (of Hormuz) remains closed for longer," the strategists said.

Still, Morgan Stanley retained a preference for U.S. stocks compared to other regions, given higher earnings-per-share growth.

U.S. ASSETS EMERGING AS A SAFE HAVEN AGAIN?

The shift stands in sharp contrast to most of last year, when investors shunned U.S. assets due to tariff-related uncertainties and rotated cash to European, Japanese and emerging ‌market assets.

Fund flows to U.S. equities and bonds have ⁠overtaken the rest of the world since the ​Middle East conflict began last month, with investors "looking to U.S. assets as a more defensive market again," Morgan Stanley said.

In an oil supply shock, U.S. Treasuries ​offer better diversification ‌as the country is less energy import-dependent than Europe, ⁠the strategists added.

(Reporting by Joel ​Jose and Siddarth S in Bengaluru; Editing by Sonia Cheema)