Oil and gas facilities targeted, interest rates unchanged—panic in global financial markets intensifies!

Questioning AI · Will the Fed’s rate cut path change under high oil prices?

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Bian Jiang | Author

Qiantang | Editor

Value Line Overview

Waking up overnight, pessimistic expectations once again cast a shadow over global stock markets.

First, Iran’s massive gas field was attacked, not only igniting towering flames but also breaking a critical link in the global energy supply chain, leading to higher oil prices.

Second, the Federal Reserve chose not to cut interest rates this time, and the number of future rate cuts may decrease in a high oil price environment.

Overnight, the three major US stock indices all fell more than 1%, and Asian markets opened with declines over 2.5%. Yesterday, the A-shares experienced a “deep V” reversal amid renewed optimism; can they hold up today?

Iran’s Massive Gas Field Attacked,

Just as Trump Made a New Statement

On Wednesday, Iran’s massive Pars natural gas field was attacked, marking a significant escalation in conflicts with the US and Israel, prompting Iran to target Middle Eastern energy infrastructure.

Pars gas field is the largest natural gas reserve in the world within Iran, jointly owned by Iran and Qatar across the Gulf.

Israeli media widely reported that the attack was carried out by Israel with US tacit approval, though neither country immediately claimed responsibility. The Israeli military did not respond to requests for comment.

Qatar accused Israel of launching the attack but did not mention any US involvement. Qatar is a close US ally, hosting the region’s largest US Air Force base.

Qatar’s Foreign Ministry spokesperson called the attack a “dangerous and irresponsible” escalation that threatens global energy security. The UAE also condemned the attack.

Iran listed several key oil and gas targets belonging to Saudi Arabia, UAE, and Qatar, calling them “direct and legitimate targets.”

Qatar said it intercepted four of five Iranian ballistic missiles launched, with the fifth hitting Ras Laffan Industrial City, causing “serious damage.”

Ras Laffan is the core area for QatarEnergy’s LNG processing.

Saudi Arabia said it intercepted and destroyed four ballistic missiles headed for Riyadh and thwarted a drone attack targeting an eastern natural gas facility.

According to The Wall Street Journal on the 18th, US officials said President Trump hopes Israel will refrain from further airstrikes on Iran’s energy facilities.

The report stated that Trump was briefed on Israel’s attack on Iran’s South Pars gas field on the 18th and expressed support, viewing it as a signal to Iran about the actual closure of the Strait of Hormuz. US officials said Trump believes Iran has received this message and now opposes further airstrikes on Iran’s energy infrastructure.

Federal Reserve: No Rate Cuts! Powell Speaks

On the 18th, the Federal Reserve announced it would keep the federal funds rate unchanged at 3.5%–3.75%, and in a post-meeting statement said, “The development of the Middle East situation remains uncertain for the US economy.”

Fed Chair Jerome Powell stated at the press conference that the evolving Middle East situation adds uncertainty to the US economy. In the short term, rising energy prices will push up overall inflation, but it’s too early to judge the extent and duration of its potential economic impact. Powell believes that even with current energy price spikes, the US economy is far from the “stagflation” of the 1970s. Current inflation is only about one percentage point above the target, and unemployment remains low. “I would reserve the term ‘stagflation’ for much more severe situations. That’s not where we are now.”

Despite high uncertainty, officials again signaled that there is room for several more rate cuts in the future. The closely watched “dot plot” indicates one rate cut this year and another in 2027, though the timing remains unclear.

Of the 19 FOMC members, 7 expect rates to stay unchanged this year, one more than in December. While forecasts for the coming years are somewhat dispersed, the median projection is that after a rate cut in 2027, the federal funds rate will stabilize around 3.1%. Powell also said that, according to the median participant forecast, the appropriate level for the federal funds rate by year-end is 3.4%, rising to 3.1% by the end of next year—consistent with December’s projections. However, Powell emphasized that these individual forecasts are uncertain and do not represent the Committee’s plans or decisions. Monetary policy will be decided at each meeting without a fixed path.

Before the Middle East conflict erupted, markets had expected two rate cuts this year, with a small chance of three. But rising oil prices and strong inflation data (including pre-energy shock figures) have revised expectations down to at most one cut in 2026.

US and Japan/Korea Stock Markets Retreat,

Can A-shares Hold Up?

US stocks fell across the board, ending two consecutive gains, with declines over 1%. At close, Dow fell 1.63% to 46,225.15; S&P 500 down 1.36% to 6,624.70, both hitting lows not seen since November last year; Nasdaq dropped 1.46% to 22,152.42.

Big tech stocks declined collectively: Nvidia down 0.84%, Google C down 1.01%, Apple down 1.69%, Microsoft down 1.91%, Amazon down 2.48%, Meta down 1.12%, Broadcom down 1.67%, Tesla down 1.63%.

Storage stocks had mixed moves: SanDisk up 4.65%, Micron up 0.01%, both hitting new closing records but fell after hours; Seagate plunged 3.4%, Western Digital down 2.84%.

In early trading, Japan and Korea markets sharply declined. As of press time, Tokyo’s Nikkei 225 fell 2.74%, Korea’s Kospi down 2.63%.

Is today the test for A-shares?

Yesterday, A-shares finally showed a bottoming pattern, with a clear upward trend emerging. But due to the Fed holding rates steady, escalating Middle East tensions, and soaring oil prices, A-shares face renewed pressure today—this is the current consensus.

However, some market participants believe that recent days’ performance shows a growing resilience to high oil prices and external shocks. Especially when A-shares dipped to 4023 points yesterday, there were signs of funds supporting the market, ultimately leading to a rebound.

Today, the index may open lower influenced by external factors, but the key is whether funds can absorb the decline. Future developments in the conflict and oil prices will continue to shape new expectations.

Within professional institutions, debates over the same geopolitical and policy uncertainties have intensified.

Morgan Stanley: Chinese Assets Show “Stabilizer” Value, Active Funds Have Quietly Reflowed

Morgan Stanley’s China chief equity strategist notes that since late February, amid escalating Middle East tensions, Chinese equities have demonstrated strong resilience. Data speaks volumes: since March, the MSCI China Index has only fallen 2%, the CSI 300 index less than 1%; meanwhile, the S&P 500 declined 3%, and the MSCI Emerging Markets Index plunged 7.4%.

Morgan Stanley believes this divergence is not accidental. Against the backdrop of geopolitical turmoil, increasing allocations to Chinese stocks can effectively improve portfolio Sharpe ratios (risk-adjusted returns). More interestingly, there are subtle shifts in capital flows: “Since the beginning of this year, we’ve seen a very encouraging change—net inflows into active global equity funds’ Chinese holdings, the first since the ‘924’ rally.” Wang Ying emphasizes that, although there was some outflow in March due to geopolitical shocks, this was not a specific move against Chinese assets but a common reaction to declining risk appetite globally.

Regarding allocation, Morgan Stanley highlights the recent popularity of the “HALO” strategy on Wall Street (investing in asset-heavy, low-elimination-rate companies). She sees global funds shifting from AI-disrupted, light-asset sectors to those with tangible barriers—like energy, raw materials, utilities, and high-end manufacturing. These sectors align well with China’s strong industrial base, further explaining China’s outperformance amid global turbulence.

CITIC Securities: Elevated Valuations Amplify Market Volatility and Profit Difficulty

CITIC Securities’ chief economist warns that despite optimistic expectations for the 2026 A-share index and high investor risk appetite, elevated valuations suggest that market volatility could be significantly amplified in the future.

The team believes that high valuations mean the market’s growth expectations are already priced in. Any external shocks—such as soaring oil prices fueling inflation expectations or uncontrollable geopolitical escalation—could trigger sharp sentiment swings and capital outflows. This objectively increases the difficulty of making profits and may even cause partial crashes. The market is not a monolith; when optimistic macro outlooks meet crowded micro trading structures, market fragility increases.