Geopolitical Disruption: Market Landscape and A-Share Resilience Under US-Iran Conflict

Why is air traffic still delayed despite the easing of US-Iran tensions?

Recent macro events have had a significant impact. Important domestic meetings have taken place, while overseas, the US-Iran conflict has escalated, affecting the geopolitical landscape accordingly. In the short term, market indices are fluctuating repeatedly, with considerable intra-day volatility.

Overall, we first analyze the basic situation of the US-Iran conflict. Currently, both sides show some signs of easing, such as the US expressing willingness to negotiate and end the conflict. However, in reality, the Strait of Hormuz, which market attention is focused on, has not yet fully resumed navigation. Our assessment is that, in the short term, it will take a longer period for the Strait of Hormuz to fully restore navigation. Previously, market expectations were that the geopolitical conflict might end within 3 to 4 weeks, but now this timeline may be further delayed. Fully restoring navigation in the strait could require a month or even longer.

Although market expectations regarding geopolitical risks and oil prices have shifted, the impact on oil supply has become an established fact. The Strait of Hormuz accounts for about 20% of global oil and LNG transportation, so any supply disruptions—whether already occurring or possible in the future—are likely to support higher prices for global commodities, including crude oil and natural gas. Overall, the US-Iran conflict may continue to cause fluctuations in market risk appetite, with related news still disrupting the market. From the transmission perspective, as oil prices rise, expectations for the Federal Reserve’s first rate cut this year are also likely to be postponed. Despite recent US non-farm payroll data showing much lower-than-expected job gains and signs of weakening US employment recovery, market expectations for rate cuts have not significantly increased. Instead, rising inflation expectations have continued to temper rate cut expectations. Therefore, against the backdrop of ongoing US-Iran tensions and rising oil prices, global liquidity may be constrained, and the resulting disturbances to equity markets are expected to persist.

In the short term, the entire market, including the A-shares index, is likely to remain volatile. However, the impact of oil shocks on the A-share market is relatively smaller compared to other Asia-Pacific markets, especially since China’s dependence on oil transported through the Strait of Hormuz is lower than that of Japan, South Korea, and other Asia-Pacific countries. Consequently, the impact of the US-Iran conflict on other Asia-Pacific nations is relatively greater, and their earnings forecasts may be more significantly revised downward. In contrast, Chinese assets are more resilient among neighboring countries, and their performance may be relatively stronger. Based on our assessment of the US-Iran situation, in the short term, it will continue to impact the market and indices. However, if the strait gradually resumes navigation within the next one to two months and bilateral tensions ease, the overall equity market could present better low-cost entry opportunities.

Clear industry and investment themes include: First, the new energy sector, with the Guotai New Energy ETF (159387) focusing on the solar storage track. Benefiting from increased global demand, AI data center needs, and space photovoltaic orders, the sector’s valuation remains low, with ample room for capital inflows driven by performance and policy support. Second, AI computing power, with the Computer ETF (512720) covering infrastructure like AIDC. The commercialization of AI agents has driven a surge in demand for computing power, with cloud providers raising prices, confirming industry prosperity. Long-term growth in domestic computing power is highly certain. Third, the power grid sector, with the Power Grid ETF (561380), seizing opportunities from US-China resonance. Domestic investments in the “14th Five-Year Plan” power grid expansion and overseas AI data center electricity demand are generating strong orders for transformers and related equipment.

In summary, these three main themes align with the industry policies from the Two Sessions and the US-China resonance logic. They can be targeted through core ETFs, balancing short-term policy catalysts with long-term industry growth dividends.

Risk warnings:

Investors should fully understand the differences between regular fixed investments and lump-sum savings methods like zero deposit and fixed withdrawal. Regular fixed investments are a simple way to guide long-term investing and average costs, but they do not eliminate inherent investment risks, nor guarantee returns, and are not equivalent to savings or financial management substitutes.

Both stock ETFs/LOFs are securities investment funds with higher expected risks and returns. Their expected yields and risks are higher than those of hybrid funds, bond funds, and money market funds.

Funds investing in STAR Market and ChiNext stocks face specific risks due to differences in investment targets, market systems, and trading rules. Investors should be aware.

The short-term fluctuations of sectors/funds shown are only auxiliary to the analysis and are for reference only; they do not guarantee fund performance.

Any short-term performance of individual stocks mentioned is for reference only, not a stock recommendation, nor a forecast or guarantee of fund performance.

These views are for reference only and do not constitute investment advice or promises. If you wish to purchase related fund products, please pay attention to investor suitability management regulations, conduct risk assessments in advance, and choose funds matching your risk tolerance. Funds carry risks; invest cautiously.

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