Industrial Securities: What is the essence of this US-Iran conflict? What impact will it have on the A-share market?

In our December 30, 2025 report, “Potential Six Geopolitical ‘Black Swans’ for 2026,” we highlighted the need to focus on geopolitical risks in six major regions this year: Russia-Ukraine, the Middle East, South Asia, East Asia, the U.S. “backyard,” and domestic U.S. issues. Following the Venezuela incident earlier this year, on February 28, the U.S. and Israel jointly took military action against Iran in the Middle East, marking the realization of the second “Black Swan”—Middle East risk. This article is based on the content of a conference call with Dr. Wang Han on February 28 regarding the U.S.-Israel-Iran conflict, aiming to provide investors with timely, professional analysis and insights.

Q1: What is the essence of this U.S.-Iran conflict? Why did the U.S. choose to act now?

A: The conflict is essentially a strategic gamble by the U.S. to reverse its strategic dilemmas in supply chains, industry, and tariffs. The U.S. chose to act now mainly due to three factors: First, Israel’s proactive push, attempting to leverage U.S. support to resolve Iran issues; second, U.S.-Israel intelligence networks in Iran may have been damaged during recent unrest, prompting Trump to intervene directly; third, Trump faces domestic political pressure and needs a quick victory to boost approval ratings and reverse unfavorable midterm election trends.

Q2: What are the strategic goals of the U.S., Israel, and Iran?

A: Israel’s core goal is to overthrow the current Iranian regime and eliminate threats to its security. Trump’s goal is more complex: not only to topple Iran’s government but also to achieve a swift and decisive regime change victory to stabilize domestic political support, deter strategic allies, and slow the decline of U.S. global hegemony. Iran’s bottom line is regime survival. As long as the current regime remains in power, if Iran can drag the U.S. into a prolonged Middle East conflict, its geopolitical value will increase, and it may gain more support from other major powers.

Q3: What geopolitical chain reactions could occur if Iran’s current regime is overthrown?

A: First, a reshaping of the Middle East landscape, with Sunni powers forced to compromise with Israel and the U.S., and Turkey possibly adopting a more pro-Western stance; second, impacts on South Asia, with key nodes of the Belt and Road Initiative potentially cut off, and Pakistan facing a dilemma of fighting on two fronts; third, shifts in the global power game, with increased geopolitical pressure on southern Russia, opening pathways for U.S. access to Central Asia, and the possible formation of a new global resource alliance.

Q4: What regional linkage risks might this conflict trigger?

A: Focus on three main directions: First, a short-term escalation of the Russia-Ukraine battlefield, with Ukraine possibly increasing offensives to contain Russia; second, a significant rise in strategic risks in South Asia, with India potentially taking adventurous actions to threaten Pakistan’s security; third, accelerated risks of Japan’s militarization resurgence in East Asia, with the U.S. possibly easing restrictions on Japan.

Q5: How will this conflict impact the A-share market?

A: Maintain the previous view that “bull markets tend to fall sharply”:

1. In the short term, the market will face shocks due to three reasons: first, insufficient recognition of Iran’s importance in Eurasian geopolitics; second, rising concerns over the U.S. building a global resource monopoly alliance; third, potential inflation in resource prices affecting manufacturing sectors.

2. The medium-term bull market foundation remains intact. First, China has the world’s largest industrial system, which is its core strategic advantage; second, if Iran withstands the initial U.S.-Israel assault, market perceptions of great power competition will undergo a systemic reversal, leading to significant changes in assets like U.S. Treasuries, the dollar, and gold; third, historical patterns over the past 300 years since the Industrial Revolution show that the world’s largest industrial nation remains the most stable in geopolitical competition.

Q6: Besides, what key signals should financial markets observe?

A: Focus on U.S. Treasuries, precious metals, and forex markets: when gold prices accelerate upward, the dollar and U.S. Treasuries turn from rising to falling, and the RMB begins to appreciate, it indicates the market believes Iran can withstand the initial U.S.-Israel attack.

Q7: From a strategic perspective, what is the long-term impact of this conflict on the U.S.?

A: This is a tactical gamble by the U.S… If successful, it could yield huge returns and significantly delay its decline in global hegemony. However, if Iran withstands the first wave of attacks, the U.S. may face serious consequences of “losing principal,” falling into a prolonged Middle East quagmire, with increased strategic disadvantages. Nonetheless, historically, the U.S. has relied on such tactical risks to address internal and external issues, indicating that the major upheaval is already in the “midgame” stage.

Risk Warning: Uncertainty in domestic and international economic policies, geopolitical risks, and global economic and financial risks.

(Source: Industrial Securities)