Former President Trump stated yesterday that the United States could potentially end military engagements with Iran within the next two to three weeks, and an agreement might be reached prior to that. This optimistic development triggered a significant surge in global stock markets, with U.S. equities soaring—the Dow Jones Industrial Average jumped by 1,100 points, while semiconductor and U.S.-listed Chinese stocks experienced notable gains. Today, stock markets across the Asia-Pacific region also rose broadly, with Japanese and South Korean indices posting particularly strong advances. The Nikkei 225 surged by 1,700 points, and South Korean stocks climbed sharply enough to trigger a trading halt.
The Middle East conflict has exerted substantial influence on global capital markets in recent periods. As previously noted, any signs of de-escalation or a potential conclusion to the war are likely to drive a strong rebound in global equities, including A-shares and Hong Kong stocks, which may break out of their current corrective phase. Reflecting this outlook, markets in Shanghai, Shenzhen, and Hong Kong all staged a robust recovery on Wednesday. This aligns with a recent market quip: "Frenzied trading moves yield little—gains and losses hinge on Trump." The abrupt military action initiated by the Trump administration against Iran triggered significant volatility across global markets in March. Conversely, any indication of conflict resolution tends to fuel a market upswing.
The war, taking place in the Middle East, carries profound implications for the global economy given the region's role as a major oil-producing hub. The Strait of Hormuz, which Iran has effectively blockaded, controls approximately 20% of global oil trade. Since the outbreak of hostilities, international oil prices have surged from around $73 per barrel to approximately $120 per barrel. As a critical industrial input, rising oil prices have directly pushed up costs for downstream sectors such as chemicals, impacting corporate profitability. This has also elevated overall economic expenses, raising investor concerns about a resurgence in global inflation. The Federal Reserve may be compelled to further delay interest rate cuts, or even refrain from cutting rates entirely this year, contributing to recent declines in global capital markets. However, should clear progress toward a resolution emerge by April, the economic impact of the conflict is likely to be short-lived.
Amid recent market declines, it has been emphasized that Trump faces considerable domestic pressure in the U.S., particularly with midterm elections approaching later this year. A prolonged military engagement would be politically unfavorable. Additionally, growing anti-war sentiment has led to large-scale protests across the country, increasing the incentive for the administration to seek a face-saving exit—likely framed as a U.S. victory. Iran, for its part, may use the opportunity to de-escalate, withdraw from hostilities, and focus on reconstruction. A gradual reopening of the Strait of Hormuz would minimize disruptions to global oil shipping, leading to a decline in oil prices and a potential strong rebound in gold prices. While Israel may prefer not to end the conflict prematurely, it also has little appetite for a protracted war. With several Middle Eastern nations jointly launching missile attacks, Israel—constrained by its limited territory—faces significant pressure. Should the U.S. withdraw, Iran may opt for a ceasefire, leaving Israel unable to sustain the conflict alone. Given these dynamics, a reduction in hostilities appears inevitable, potentially leading to negotiations among the involved parties. In such a scenario, the impact of Middle East tensions on the global economy would be temporary rather than lasting.
Turning to A-shares and Hong Kong stocks, recent market corrections have dampened investor confidence. During a live discussion with Professor Liu Jipeng on Monday evening, it was jointly affirmed that the defense of the 4,000-point level would succeed, and the market is expected to rebound above that threshold. As external pressures diminish and more proactive domestic macroeconomic policies are implemented—including moderately accommodative monetary measures from the central bank—the market is likely to resume its previous trajectory of a steady, long-term bull run.
Sector divergence remains evident. The "new barbell strategy" advocated earlier this year continues to hold: one end of the barbell consists of leading technology stocks aligned with innovation themes highlighted in the 15th Five-Year Plan, such as robotics, semiconductors, computing power, commercial aerospace, solid-state batteries, and controlled nuclear fusion. The other end comprises heavy-asset, low-volatility traditional blue-chip stocks—termed "HALO assets"—including sectors like power grid equipment, non-ferrous metals, coal, oil, and gas. These resource and energy segments remain key focal points for the market. In contrast, traditional sectors in the middle of the barbell have underperformed, particularly those with weaker fundamentals. However, during a market rebound, most sectors are expected to participate, albeit at varying paces. The new barbell strategy remains valid, and investors are advised to focus on the dual themes of technology and HALO assets when positioning for the 2026 market cycle.
The current market remains in the mid-phase of a bull cycle. The price-to-earnings ratio of the CSI 300 Index stands at approximately 14 times, below its historical average. In terms of both duration and valuation, this slow and prolonged bull market is still in its early stages. Investors should maintain confidence and patience, actively seeking high-quality stocks or funds that have been oversold during the correction to capture the next wave of market advances. It is particularly important not to relinquish sound holdings during periods of market bottoming. At present, confidence is more valuable than gold.
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