A review of five historical oil crises triggered by conflicts reveals distinct patterns in sector rotation. GF Securities maintains its core conclusions from last week's report: first, stock indices require a period of bottom consolidation; second, the "April decision-making" period should focus on high-growth sectors independent of overseas oil price inflation and high interest rates, including new energy, domestic AIDC, and overseas computing power.
This report examines the impact of high oil prices resulting from five historical wars on major sectors and industries.
**Economic Impact of a Hypothetical Hormuz Strait Closure:** (1) A Dallas Fed model indicates a 58% probability of the Strait remaining closed through Q2 2026. Betting platform Kalshi shows a 63% probability of passage resuming before July 2026. (2) Closure would reduce global oil supply by nearly 20%, LNG by 20%, urea by 30%, ammonia and phosphates by 20%, and sulfur by 50%. (3) A one-quarter closure could push WTI crude to $98/barrel in Q2 2026, reducing global GDP growth by 2.9 percentage points. The most likely scenario involves a Q2 shock followed by Q3 recovery without a substantive recession.
**Comparative Analysis with Historical Oil Crises:** Current conditions resemble past crises in several aspects: (1) Economic Cycle: Pre-war fiscal easing and demand recovery mirror the post-Asian Financial Crisis state during the Kosovo War. (2) Monetary Cycle: Current interest rate cuts during monetary normalization are similar to the Gulf War period, though the latter involved recessionary cuts. (3) Oil Price Trajectory: The First and Second Oil Crises saw sustained high prices due to supply constraints. The Kosovo War period maintained high prices from OPEC cuts and demand growth. Price spikes quickly reversed after the Gulf War (6 months) and Russia-Ukraine conflict (3 months).
**Sector Performance Patterns During Crises:** (1) Outperforming sectors typically include war-catalyzed commodities (oil, precious metals, defense) and defensive plays (telecom, tobacco). However, defensive sectors may decline late in bear markets, as seen in August-September 1974. Strong industry trends also outperform, such as consumer sectors in the 1980s and technology in the 1990s. (2) Oil and gas outperformance generally peaks with oil prices, while tourism and leisure suffer most from high oil prices. (3) Sustained high prices require assessing inflation and demand impacts: the First Oil Crisis was negative (leading to stagflation), while the Second Oil Crisis and Kosovo War were positive due to shorter duration or gradual impact. (4) When oil prices spike then fall quickly, markets typically resume their pre-war trajectories, with capital concentrating in sectors with clear growth trends, such as defense around 1980, consumer goods around 1990, and technology in the late 1990s.
**Current Market Outlook for 2026 Oil Crisis:** With Middle East tensions keeping Brent crude above $100/barrel and Hormuz Strait closure reducing daily crude flow by 20 million barrels, the historical pattern of "resource nation conflict + rising oil prices + soaring inflation + rate hikes" often leads to recession. Markets now anticipate the Fed may not cut rates this year, boosting global risk aversion.
The analysis compares three historical oil crises and the Russia-Ukraine conflict with the current situation. Post-crisis sector rotation shows: - First Oil Crisis: U.S. stocks entered a year-long bear market. Outperforming sectors included precious metals, telecom, tobacco, and oil/gas, though no sector achieved absolute returns. - Second Oil Crisis: U.S. stocks recovered after one month. Outperforming sectors included war-related commodities and emerging technology investments. - Gulf War: Markets recovered after two months. High-growth consumption sectors resumed their bull market trends. - Kosovo War: Technology sectors continued leading despite Fed rate hikes. - Russia-Ukraine Conflict: Tech sectors led the market recovery following aggressive Fed tightening.
**Key Market Changes This Week:** Downstream demand shows mixed signals with property transactions declining year-over-year but improving sequentially. Auto sales declined year-over-year in early March. Midstream manufacturing saw mixed price movements in steel and chemicals. Upstream resources recorded rising international commodity prices. Major equity indices declined with materials and utilities outperforming while financials and technology lagged. Market valuations decreased slightly across most segments. Liquidity conditions showed a net injection from central bank operations.
**Risks:** Geopolitical conflicts exceeding expectations, overseas inflation and U.S. economic resilience limiting global liquidity easing, and domestic stabilization policies falling short of expectations.
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