From Chaos to Focus, A-Shares Approaching a Breakthrough Moment!

Currently, the A-share market is approaching a critical turning point. From the market perspective, the Shanghai Composite Index has been oscillating downward near 4,200 points since the beginning of the month, closing at 3,957.05 points on March 20, a decline of 4.94% for the month. The Shenzhen Component Index and the Sci-Tech Innovation Board Index fell by 4.34% and 9.72%, respectively. Meanwhile, the ChiNext Index gained 1.26%, driven by the new energy sector. At the same time, market trading sentiment has become more cautious, with the average weekly trading volume dropping to 2.19 trillion yuan on the week of March 20, a decrease of 456.5 billion yuan compared to the first week of the month, indicating a strong wait-and-see atmosphere among funds.

In the short term, lacking a clear main theme, profound changes in the external geopolitical situation are providing new valuation logic for the A-shares. On March 19, the US-Iran conflict significantly escalated, with both sides directly attacking each other’s oil and gas facilities. Iran launched large-scale missile strikes against US-related oil and energy infrastructure in the region in response to previous attacks on its own facilities. Subsequently, key targets included Qatar’s largest liquefied natural gas (LNG) facility and a refinery near Riyadh, Saudi Arabia.

These events mean that core energy production and export facilities in the Middle East have suffered physical damage— even if future conflicts ease, repairing these facilities and restoring capacity will take a long time. As a result, global crude oil supply faces substantial contraction, shifting oil prices from sentiment-driven to fundamentals-supported.

International oil prices responded swiftly, with Brent crude futures briefly surpassing $112 per barrel. Citibank estimates that if the Strait of Hormuz remains closed for the next four to six weeks, global daily oil production could decrease by 11 to 16 million barrels, pushing Brent prices to the $110–120 range.

The certainty of rising oil prices has increased significantly. The market should not only view this as a negative signal for global inflation but also focus on how it reshapes the structural opportunities in the A-share market. The recent pattern of “missing main themes” may be broken, as an investment theme centered around energy chains and related beneficiary sectors is gradually becoming clearer.

First, the chemical industry is at the front end of the transmission chain. The Middle East situation not only pushes up oil prices but also directly disrupts global chemical supply. Some international chemical giants have announced price increases for various products in Europe, with increases up to 30%. The Strait of Hormuz is a critical route for the export of urea and sulfur—carrying nearly one-third of urea and 44% of sulfur exports. Shipping disruptions have already led to the shutdown of fertilizer plants and raw material shortages in the Middle East. Natural gas, a primary raw material for nitrogen fertilizers, has seen rising prices, increasing the cost of ammonia production; sulfur shortages also support higher phosphate fertilizer prices.

Currently, during the Northern Hemisphere’s spring planting season, fertilizer demand is concentrated, and supply chain disruptions are driving international fertilizer prices higher. Domestic chemical products, benefiting from cost advantages, have room for recovery in industry prosperity.

Second, the coal chemical sector’s substitution logic is becoming more prominent. With rising crude oil prices, the cost advantage of coal-based chemical routes is further amplified. Product prices tend to follow the petrochemical chain upward, while costs remain relatively stable, improving profit margins. Given China’s resource structure of “rich in coal, poor in oil, and limited in gas,” the strategic position of coal chemicals in energy security is also rising.

Third, the substitution logic of new energy continues to strengthen. Historical experience shows that sharp increases in traditional energy prices tend to accelerate the global energy transition in the medium to long term. Since the conflict, gasoline prices in Europe and the US have risen significantly, affecting residents’ travel and car purchase decisions, with increased inquiries and sales of electric vehicles in some markets. Domestic refined oil prices also face expectations of significant hikes. Amid normalized fluctuations in fossil fuel supply, the economic viability of wind, solar, and energy storage has become more apparent, and the rise in oil prices provides a new long-term growth driver for the new energy sector.

Additionally, the prosperity of oil and gas transportation and oil services sectors continues to improve. High oil prices help improve profitability for oil and gas companies, and energy supply security policies may lead to increased capital expenditure. Rising inflation expectations also support precious metals and some industrial metals.

Looking back at recent market adjustments, the main reason for funds’ cautious stance was the high valuation of previous hot sectors, which created divergence, and the earnings verification pressure during the annual report disclosure period. Shrinking trading volumes and funds shifting to defensive sectors are typical signs of market waiting for clearer signals. The external geopolitical changes provide just such a signal, likely guiding funds from scattered risk aversion to focused deployment.

In this context, investors’ strategies can shift from “passive defense” to “active focus.” Although short-term market volatility may continue, the emergence of a new main theme will likely improve disorderly rotation.

In terms of allocation, focus on the core variable of “rising oil price center”: prioritize chemical industry leaders with cost transmission capabilities, especially those benefiting from product price increases; pay attention to the performance resilience and investment value of coal chemical sectors; monitor core stocks benefiting from energy substitution logic in new energy; and also consider oil and gas transportation, oil services, and non-ferrous metals with inflationary characteristics. Moreover, in the context of global supply chain disruptions, manufacturing leaders that expand their global market share through technology and scale are also expected to see improved profitability.

Looking ahead, as the market shifts from “worrying about external risks” to “leveraging external logic,” and as the performance of energy-related and beneficiary sectors is validated in subsequent earnings reports, the A-share market is expected to emerge from the current low-volume consolidation phase into a clear and sustainable main trend. The turning point is approaching.