Markets are facing a challenging backdrop right now.
Interest rates are rising and are expected to move higher after an escalating conflict in the Middle East pushed energy prices sharply higher. This combination is creating pressure across many parts of the market and has pushed the ASX 200 index sharply lower this month.
However, not all companies are necessarily going to be impacted negatively by these conditions.
For example, listed below are two ASX shares that could be better positioned in the current environment.
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Woodside Energy Group Ltd (ASX: WDS)
The first ASX share that stands out in the current environment is Woodside Energy.
The company is Australia's largest listed oil and gas producer and generates the majority of its earnings from global energy markets.
With oil prices now trading above US$100 per barrel, energy producers like Woodside are likely to be benefiting greatly and generating significant cash flow from its operations. This can support strong dividend payments and also investment in future projects.
Woodside's portfolio of long-life assets and global operations means it is well placed to capture the upside from elevated energy prices.
While commodity prices can be volatile, the current supply constraints and geopolitical risks could keep energy markets tight for some time.
Commonwealth Bank of Australia (ASX: CBA)
Another ASX share that could benefit in the current environment is Commonwealth Bank of Australia.
But rather than higher energy prices, it is rising interest rates that could benefit Australia's largest bank.
That's because banks typically see their net interest margins (NIMs) expand when interest rates rise, as they can earn more on loans relative to what they pay on deposits.
This can lead to higher profitability, particularly for well-capitalised banks with strong market positions.
Given that Commonwealth Bank is the largest bank in Australia and has a dominant share of the mortgage market, it arguably stands to benefit more than most.
Of course, higher interest rates can slow lending growth over time. But as long as they don't trend too high, this banking giant should be positioned to continue growing ahead of system thanks to its dominant position in the market.
In the current environment, this could help underpin further earnings and dividend growth for the banking giant.
