Following recent US tariff actions, the Middle East situation may reach a delicate balance where conflicting parties maintain mutual deterrence while preventing escalation. The fact of supply chain disruption remains unresolved, though intermittent shipping passage is possible before a ceasefire agreement is reached. In an environment of gradually eroding global rules and order, countries with resource, geographical, and manufacturing advantages will leverage these comparative strengths for survival and development. Within the context of the Middle East conflict, periodic blockades of the Strait of Hormuz could serve as a tool to counter US-Israel actions, increasing the probability of sustained and repeated energy supply disruptions. However, the impact of energy and resource supply disruptions on industrial demand may differ from the 1970s-1980s. During that period, Western economies were already undergoing deindustrialization, production outsourcing, and early-stage globalization, with the two oil crises accelerating this trend. Currently, the global context is characterized by heightened insecurity and a push for reindustrialization, representing a fundamental background difference that influences future analytical frameworks. Direct impacts from current events include accelerated global electrification, order shifts from overseas to China, and increased supply chain diplomacy—three directions warranting close attention. Short-term capital markets remain in a sentiment cooling phase, where loss-aversion psychology may generate some position reduction demand. For allocation strategies, maintaining positions in China's dominant manufacturing sector and awaiting April clarity is recommended.
Middle East Trajectory Post-US Tariff Actions: Maintaining Deterrence, Delicate Balance 1) US Treasury yields have reached a critical juncture, with possibilities remaining for tariff actions before situation失控. Recent delays of so-called ultimatums and repeated verbal reassurances have eased market concerns regarding Middle East tensions and energy supply disruptions. Although markets are becoming desensitized to these verbal interventions, they objectively demonstrate that tariff actions remain possible. Since last year, whenever the 10-year US Treasury yield reached the 4.4%-4.5% range, financial market pressure intensified, and corresponding tariff actions followed. Current yields have again reached this critical level.
2) Supply chain disruption facts remain unresolved, with intermittent shipping possible before ceasefire agreement. Shipping data shows recent four-week averages of only 11 oil tankers entering the strait weekly with average capacity of 405,000 tons (compared to pre-war 10-week averages of 420 ships and 36.391 million tons, representing 2.6% and 1.1% recovery respectively). Recent four-week averages show 18 oil tankers exiting weekly with 1.11 million tons capacity (compared to pre-war averages of 421 ships and 35.919 million tons, representing 4.3% and 3.1% recovery respectively). Supply chain pressures have begun spreading to Asian and European countries, moving from upstream to midstream manufacturing, with product hoarding and quotation suspensions becoming frequent. Although both US and Iran have proposed ceasefire conditions, at least five core disagreements exist, making short-term consensus highly unlikely. Rapidly rising economic costs suggest intermittent shipping remains possible before negotiations conclude, though Iran may more frequently use blockades as an economic weapon.
Probability of Sustained Energy Supply Disruption Rising, But Demand Impact Differs from 1970s-1980s The 1970s saw Western economies beginning deindustrialization, promoting production outsourcing and supply chain globalization, with oil crises accelerating this process. The current background features deglobalization, Western reindustrialization efforts, and growing national demands for supply chain autonomy and security. World Bank data shows global trade as percentage of GDP declining from post-pandemic highs exceeding 62% to about 57% in 2024, while US manufacturing construction spending grew from $983.2 billion in 2021 to $2.8 trillion in 2024. AI infrastructure, energy resource infrastructure, broader category reserve needs, and key production环节 autonomy will generate robust industrial demand. Current conflicts will only drive major countries to enhance industrial capabilities to meet modern warfare consumption, pursue supply chain diversification and stability, and further improve industrial capacity. Simultaneously, smaller countries will leverage their resource, energy and geographical advantages to survive US-China competition. This background ensures that even with rising energy costs, global industrial demand won't weaken, while supply disruptions may persist, creating periodic supply-demand gaps. When security concerns replace efficiency as dominant factors, limited resources flow toward industrial sectors, with cost increases ultimately squeezing consumption sectors (AI substitution being another force). This industrial-strong, consumption-weak environment doesn't fit traditional "stagflation" frameworks simply, nor allows easy monetary policy judgments. China experienced similar environments in 2021.
Accelerated Electrification, Overseas-to-Domestic Order Shifts, Supply Chain Diplomacy Warrant Attention Three directions require close monitoring. First, accelerated global electrification processes. This market-consensus direction已经开始pricing, with China's supply capabilities and scale advantages across electrification产业链—solar, wind power, lithium batteries, power equipment—expected to manifest after short-term oil price impacts subside, capturing stronger external demand benefits. Second, overseas-to-domestic order shifts. European traditional advantage sectors (like chemicals) seeing capacity closures due to high energy costs and carbon mechanisms have evolved from individual cases to trends. After current supply chain disruptions, some Chinese competitors in Asia-Pacific also began closing capacity, with recent increases in domestic producer price inquiries. For China, coal chemical routes' cost buffers in methanol, urea, PVC, MDI等varieties, plus electrification's structural substitution of oil demand, enhance midstream manufacturing cost resilience in rising oil price environments. Overseas-to-domestic order shifts represent important observation线索. Third, supply chain diplomacy. Recent reports indicate Philippines president expressing willingness to restart joint oil-gas development negotiations with China given energy crises from Middle East conflicts. India, as world's largest urea importer, has requested China consider easing urea export restrictions as conflict disrupts LNG supplies. China's export control capabilities in fertilizers, rare earths, critical minerals等领域无形中create high-value diplomatic筹码, with enterprises receiving additional quotas during定向supply processes likely to benefit substantially.
Short-term Markets Remain in Sentiment Cooling Phase, Loss-Aversion Psychology May Generate Position Reduction Demand Derivatives indicators suggest the most panicked phase may have passed, but sentiment continues cooling. Recent options showed extreme panic characteristics首次appearing in current decline, though subsequent days saw significant implied volatility retreats, indicating extreme panic may have eased. However, derivatives indicators show continued sentiment cooling. Constructed sentiment indicators based on options volume, open interest, IV, skew等metrics have remained below 30th percentile of recent 100 trading days for two weeks. Sample private fund positions and investor sentiment indicators also show cooling signals. By March 20, sample private fund positions surveyed through channels reached 79.3%, lowest since February. Since March, tool-type ETFs preferred by absolute return funds showed significant net redemptions. By March 26, tool-type ETF net outflows reached 3.12 billion yuan (5-day average), at 2.0th percentile of past year levels, possibly reflecting absolute return funds' position reduction needs. With Middle East conflicts难以quickly resolved, impatient or loss-averse funds tend to reduce positions during rebounds to avoid volatility. Referring to A-share performance after 2025 tariff actions, from April tariff implementations and US-China tariff war escalation to May Geneva and June London talks, the process took over two months, with A-shares only beginning structural recovery in July and accelerating in August. Current market sentiment and capital recovery may similarly require months.
Maintain Positions in China's Dominant Manufacturing Sector, Await April Clarity Current recommended core positions remain in sectors where China has share advantages, overseas capacity reset costs are high and difficult, and supply elasticity is easily policy-affected, focusing on chemicals, nonferrous metals, power equipment and new energy. Recent liquidity shocks have brought many品种valuations back to inexpensive levels, with extreme negative narratives somewhat similar to offshore品种after early April last year, creating significant expectation gaps and low valuations. Beyond these core positions, increasing exposure to low-valuation factors is recommended, particularly focusing on insurance, securities and power sectors. From short-term景气signal-driven frameworks, price increases remain the sharpest spear, with PPI trades increasingly likely becoming annual main theme—April-May represents decision period. Multiple线索and structural opportunities merit priority attention: 1) Chemical products with secondary alternative原料/process routes under oil price impacts (China's these品种typically have higher coal content than overseas competitors), where primary原料(crude oil) price increases create wide spreads; 2) Varieties with significant original Middle East/Western Europe capacity shares, where supply interruptions may create additional supply-demand gaps driving price increase expectations; 3) Products where substitute goods face cost-driven price increases, with demand improvements driving supply-demand gaps; 4) Supply-tight varieties already in price increase channels, where cost increases provide pricing windows. Additionally, innovative drugs recently showed certain liquidity shock desensitization characteristics while industry trends remain unchanged, also warranting attention.
Risk Factors Intensified US-China technology, trade and financial摩擦; Domestic policy intensity, implementation effects or economic recovery below expectations; Unexpected domestic and international macro liquidity tightening; Further escalation of Russia-Ukraine, Middle East等regional conflicts; China's real estate inventory digestion below expectations.
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