Ask AI · How the U.S.-Israel-Iran War reshapes the global capital safety logic?

By / Zhuangzhang Huang Liming

When the missiles of the U.S.-Israel-Iran war slice through the night sky over the Strait of Hormuz, what’s being shattered is not only the old geopolitical order—but also the foundational cornerstone of the “petro-dollar” hegemony that has been carried on for half a century.

Right now, Wall Street may still be toasting with cheers over AI’s unstoppable surge; while the royal houses and wealthy elites in the Middle East are, overnight, counting their luggage—preparing to flee this stretch of land that had long been regarded as an “everlasting safe haven.”

This isn’t alarmism—it’s a financial earthquake that’s happening.

Although, in the short term, Chinese assets have been hit by global shockwaves due to high oil prices, Chinese assets are clearly more resilient than other global asset classes. The stability and safety value of H-share assets and A-share assets is once again coming into focus.

Especially under shocks from high energy prices, industries and regional countries overly dependent on petrochemical energy will face greater risks of stagflation. But at the same time, the high-end manufacturing sectors and regional countries—especially China—leading in AI infrastructure, green power and new energy, and hard-tech, will have the chance to cross the petrochemical energy cycle bottleneck, and are better positioned to usher in a new “prosperity cycle.”

With the arrival of the AI era, green power and new energy are becoming the new lifeblood of the global industrial age. Europe and Japan will also pivot again, fully embracing the rise of green power and new energy. AI development regions and countries that lack green power and new energy will face an ultimate electricity bottleneck. There’s no doubt: China has a first-mover advantage in this AI-and-green-power-new-energy rise.

According to the latest market data and expectations, an ongoing Middle East capital migration—“moving east to China”—has already quietly begun. In the first week of March, Middle East capital saw net inflows into Hong Kong, with market expectations exceeding $38 billion. Yet between 2024 and 2025, the expected annual net inflows of Middle East capital into the Hong Kong market were only about $22 billion. Meanwhile, within Hong Kong stock IPOs, the share of subscription by Middle East sovereign wealth funds jumped directly from 18% to 39.2%. The consultation volume of Hong Kong family offices also rose by 50% quarter-over-quarter.

For ordinary investors, this is not just news—it’s a benefit that you need to recognize: the revaluation dividend of China’s assets. This article will break down the dual-core trading logic of “SMART-HALO,” helping you cut through the fog and see which China assets will become the contested battleground for Middle East “hedging funds” and “transition capital.”

I. The logic of survival—when “safety” overrides “returns”

The alarm from the Strait of Hormuz is also a collapse of faith.

In the spring of 2026, the world has changed.

Ray Dalio’s urgent call in mid-March was deafening and clear: “The U.S.’s fight with Iran over the Strait of Hormuz will be an ‘ultimate showdown,’ and its outcome will profoundly affect U.S. hegemony and the world order.” Dalio also embedded the current situation into the “cycle of the rise and fall of empires” framework he has studied for the long term.

This is not mere macro anxiety; it’s a future prophecy about the restructuring of the world order. For the top wealthy elites in the Middle East, this war has triggered a profound spiritual crisis—the failure of the ‘dollar protection umbrella.’

For a long time, the logic of Middle East capital has been: “sell oil to the West with the left hand, invest in the United States with the right hand—swapping for protection by the U.S. military.” This is a seemingly perfect closed loop.

However, when missiles can easily threaten oil fields, and when American homeland-first ideology leaves the protection umbrella full of holes, Middle East capital suddenly realizes: even if it has mountains of dollars, if those dollars can’t be converted into real security, then they’re nothing more than a stack of papers that could be frozen or devalued at any time.

Therefore, the new global asset-pricing formula is ‘security premium.’

Today, in 2026, the core factors behind global asset pricing have undergone a fundamental shift.

In the past, we looked at ROE (return on equity) and DCF (discounted cash flow). Now, we first need to look at the ‘survival coefficient.’

Under this new logic, the ‘security premium’ begins to surpass the ‘efficiency premium.’ Capital no longer flows simply to places with the highest returns (such as high-risk AI startups). Instead, it flows to places with the highest certainty and the most stable geopolitics.

That’s why, against the backdrop of global stock market turmoil and a wild surge in oil prices, China’s assets end up performing relatively steadily—the core reason.

Relying on a complete industrial system, an independent energy network (green power + ultra-high-voltage transmission), and a strategy centered on a domestic circulation as the mainstay, China has become the only “onshore fortress” amid the seas of global upheaval.

Commission President Ursula von der Leyen was blunt: in just 10 days, Europe spent €3 billion more on fossil fuels. These €3 billion are not only money to buy oil; they are a massive penalty paid for “insecurity.”

Therefore, the Middle East’s ‘eastward push’ is, at its core, an act of ‘seeking safety to survive.’ They need to find an economy that is safer than the United States, more stable than Europe, and capable of absorbing their immense wealth. Looking across the world, only China—and China’s assets—fit the bill.

II. Dissecting the Middle East’s ‘two faces’ and the SMART filter

You must first figure it out: who exactly is coming? And what do they want to buy?

Many people have a misconception about “Middle East capital,” believing that they’re a bunch of “silly money” waving checks around with no order or discipline. That’s a huge mistake. Based on a deep recap by China International Capital Corporation (CICC), Middle East capital is actually “top hunters” dancing while wearing shackles.

We need to break this wave of capital into two types of funds. Their entry logic differs completely.

First type: resident-type capital—seeking speed, seeking stability.

This type of capital is not sovereign wealth funds. It consists of family offices, quant funds, and private capital concentrated in Dubai and Abu Dhabi.

Their characteristic is extreme sensitivity to geopolitical risk. Data from Boston Consulting Group shows that in 2024, the overseas assets registered in the UAE had reached $700 billion.

And as the situation escalates, it appears this segment of funds is suffering “second-round damage.” Their preferred strategy is “asset relocation.”

In terms of where the money goes, they may not directly buy stocks at first. Instead, they look for a safe “landing spot.” Hong Kong, with its unique advantages under “one country, two systems,” becomes their top-choice safe haven. The hallmark of this segment is “arrive fast, leave fast.” They tend to favor highly liquid cash-like assets, Hong Kong real estate, and even China’s Shanghai-Shenzhen-Hong Kong Stock Connect-related assets.

Second type: Middle East domestic sovereign wealth funds—seeking long term, seeking substance.

These are the target funds we truly want to expect entering China. They are “patient capital,” represented by the Abu Dhabi Investment Authority (ADIA), Kuwait Investment Authority (KIA), and Saudi Public Investment Fund (PIF).

Their characteristics include: assets on the scale of over a trillion dollars, investment horizons of 3–7 years for listed stocks, 5–10 years for primary private equity, and more than 10 years for cross-border infrastructure and technology projects; financial-asset allocations (such as ETFs, QDII, and financial equity) for 5–15 years—reflecting “smart money” long-term planning.

In the past, Middle East domestic sovereign wealth funds relied too heavily on the United States. Data shows that ADIA’s allocation weight in North America is 45%-60%, clearly higher than other regions (Europe 15%-30% / emerging markets 10%-20% / developed Asia 5%-10%). This single allocation structure carries enormous risk under geopolitical conflict.

Therefore, the Middle East domestic sovereign wealth funds’ new strategy in the future faces adjustments—they must diversify with a ‘de-U.S.’ approach. They need China’s assets to hedge global risks.

At this point, it’s necessary to reveal the ‘SMART’ filter of Middle East capital.

To understand the buy logic of these top institutions, the shopkeeper, together with CICC data, distilled a five-dimensional SMART model. If the stocks you hold don’t meet these five criteria, there’s a high chance Middle East capital will ignore them.

1. S (Security): safety first— assets must be held by the state and have extremely deep moats. For example, the power grid, core mineral resources, and state-security-related technologies.

2. M (Manufacturing Abroad): global manufacturing— companies must have overseas expansion capabilities, helping Middle East capital achieve the leap from “selling oil” to becoming an “industrial country.”

3. A (Advanced Tech): hard-core technology— not PPT tech, but real, hard technology. This is an urgent need for Middle East transition in the “post-oil era.”

4. R (Resilience): anti-cyclical resilience— cash flows must be as stable as water and electricity, earning money regardless of whether the economy is good or bad.

5. T (Tradability): tradable value— valuations must be low enough, and dividends must be high enough.

It’s precisely under this model that the shopkeeper places greater emphasis on the dual-core trading logic of HALO: high-dimensional strikes that go beyond traditional valuation.

Traditional DCF models (discounted cash flow) have already failed in the face of geopolitics. We need to introduce an entirely new dual-core HALO logic to re-price assets.

First core: H (High-Altitude Logic Operation)—high-dimensional logic operation, meaning stepping out of the K-line chart and looking at assets from the height of civilizational evolution. Why would Middle East capital dare to buy CATL? Because in their eyes, batteries are the future “new oil.” This is a high-dimensional purchase based on the replacement of energy civilization.

Second core: H (Heavy Assets, Low Obsolescence)—heavy assets, low obsolescence, meaning finding assets whose physical attributes won’t change, and whose reset costs are extremely high. A brutally realistic point: internet companies might shut down overnight, but the Three Gorges Power dam, and Ping An’s healthcare network, are “hard currencies” that cannot be destroyed by war.

III. Data reveals the internal-external resonance of China’s core assets

Idle logic doesn’t work—we need to see where the actual cash is going.

According to CICC’s estimate, even just the Abu Dhabi Investment Authority (ADIA) holding China-related stocks should exceed $15 billion. The institutions holding the most China-related stocks include ADIA and the Kuwait Investment Authority, among other sovereign funds. But that’s only the tip of the iceberg—true big sharks are only just starting to sail overseas and push east toward China.

The above data-and-figure chart of these institutions’ heavy holdings is sourced from: Huaxi Securities.

Combining the data charts of the top 10 A-share listed companies by market value held by Northbound capital, as well as the portfolio data charts of institutions’ heavy holdings, the shopkeeper—together with the investment style resonance formed by Middle East capital, Northbound capital, and A-share institutional heavy-holding investors—has comprehensively sorted out China’s high-quality core assets. This can also be used to sketch, at least initially, the “future shopping list of Middle East capital”:

First: resources and energy—from the closed loop of ‘old oil’ to the closed loop of ‘new green power.’

The Middle East understands resources best. When they invest in China’s resource stocks, they’re not doing it for speculation—they’re doing it to lock in. Data shows that ADIA’s top heavy-holding stock in China A-shares is Zijin Mining, with holdings of more than RMB 3.4 billion. From an investment-logic perspective, copper is the blood of electrification, while gold is a monetary anchor. In a stagflation expectation scenario, Zijin Mining is a perfect “Middle East style” asset—heavy assets, low obsolescence, and resilience against inflation.

Kuwait Investment Authority (KIA), on the other hand, made a big bet—$500 million—in the Hong Kong IPO of CATL, becoming the largest cornerstone investor. Its core investment logic is: batteries are power. By investing in CATL, Middle East capital is effectively purchasing the “pricing power” of the future global era of electric vehicles.

Second: finance and core assets—safe havens within safe havens. In turbulent times, financial assets are the reservoir for funds. Although in the past Middle East capital rarely laid out China’s financial-sector assets, given today’s historical low valuation, they should substantially increase their allocations to attract them.

The market’s understanding of China Ping An is still stuck at “an insurance company,” which is completely wrong. Ping An is actually an AI technology-driven financial group. The just-disclosed 2025 annual report shows net profit of RMB 134.78B—about RMB 369 million per day—up 6.5%.

From the Middle East investment-style logic, Ping An has a large offline healthcare network and an AI customer service system (AskBob). Combined with valuations currently at historic lows (P/E around 4–5x), and the high-dividend characteristics matching Middle East capital’s demand for “income stocks,” even top executives of China Ping An directly said in earnings meetings that “the company’s valuation is still at a low level.”

China Merchants Bank relies on its moat as “the king of retail.” Its logic is that, in a falling interest-rate cycle, the bank’s low volatility and very high return on net assets (ROE) make it a “China-version bond” in the eyes of Middle East capital.

At the same time, based on P/E (TTM), non-bank financials (insurance and brokerages), consumer staples (food & beverages), and household appliances—along with other sectors—currently have P/E ratios at historical low percentiles, while sectors like computers and electronics currently have P/E ratios at historical high percentiles.

The above data-and-figure charts are sourced from: Huaxi Securities.

Third: hard tech and high-end manufacturing—hard-core exports of China manufacturing.

As Midea Group is a global hidden champion, compared with Gree Electric Appliances, Midea has successfully transformed into a global technology group. Its layout in industrial technology, building technology, and robotics (KUKA) perfectly aligns with Middle East capital’s needs for “globalized manufacturing.” Data shows that Middle East capital prefers manufacturing leaders such as Hengli Hydraulic and BOE Technology, and Midea is precisely the aggregation of this kind of asset.

CSPC?—No, that’s wrong; it should be WuXi AppTec. WuXi AppTec, as a “water-seller” with rigid demand—medical care is a rigid need—has a good price-performance ratio for the innovative drug industrial chain under the shadow of volume-based procurement. Middle East capital may focus on China’s engineering talent dividend in biomedical R&D.

In the Middle East capital’s eastward strategy, Hong Kong’s role is irreplaceable. It’s the only special node where global capital can simultaneously consider both “China’s growth” and “common-law style protection.” At the same time, mutual market access between A-shares and H-shares via the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect programs will also bring convenience for Middle East and global capital to enter China’s A-share market.

As the Dubai real estate index falls (nearly 30%), the appeal of Hong Kong real estate and financial assets is surging. Hong Kong is not only a transit hub for capital—it will also become the “headquarters” for Middle East capital’s allocations to China assets.

IV. Global stagflation and prosperity coexist

Global macro for 2026—whether it’s countries or the asset landscape—will be brutal: stagflation and prosperity coexist.

In the stagflation zone, low-end manufacturing industries and regional countries that rely on traditional fossil energy will continue to be squeezed by both high oil prices and high interest rates. In the prosperity zone, the high-end manufacturing industries and regional countries that lead in green power and new energy, AI infrastructure, and hard-core technology will be able to cross the petrochemical energy bottleneck—and have a better chance to usher in a new round of a “prosperity cycle.”

In essence, in the U.S.-Israel-Iran war, the U.S.’s involvement represents the ultimate desire for control over petrochemical energy—moving from the age of land power to the age of sea power. This is an attempt to carry out a full-scale contest of the global energy landscape before China’s new-energy wave rises comprehensively and before the world accepts a transition into the new-energy era.

Because as the AI era arrives, electricity is the bottleneck. New energy determines the future of AI, and in turn, to a certain extent, it also influences the early layout of the future space-power era.

Globally, countries that over-rely on petrochemical energy will face a higher risk of stagflation, while countries led by green and sustainable new-energy industries—especially China—will have greater opportunities for prosperity.

Therefore, China investors should not use “retail-investor thinking” to guess which stock Middle East capital will buy. Instead, use sovereign-fund thinking to allocate your assets.

First: embrace ‘energy-containing assets’: invest in companies that can provide unlimited clean energy (solar PV, nuclear power) or energy for computing (power grids, ultra-high-voltage). The core logic is: AI’s end is electricity. Whoever controls energy controls the future.

Second: embrace ‘hard assets’: abandon the concept stocks of light assets, and look for “old shops” that own physical entities, have high reset costs, and generate abundant cash flow. The core logic is that in the face of war and turmoil, only steel-and-concrete and real-entity networks are true wealth.

Third: embrace the ‘security premium’: in an era of geopolitical uncertainty, a certain business model and certain dividends are more valuable than vague, intangible “stories.” The core logic is to find those “low valuation + high dividend” core assets that have been wrongly discounted by domestic capital.

The smoke and dust of the U.S.-Israel-Iran war will ultimately drive a “moving east” capital migration across the globe.

This is not only the movement of money, but the beginning of a shift in the global center of gravity of civilization. The Middle East’s “petro-dollars” are looking for a new home, and China—thanks to its complete industrial system, stable politics, and leading new-energy technologies—will become the ultimate destination of this migration.

Remember this logic: safety is greater than efficiency; hard-core wins over the hollow; green power and new energy become the new lifeblood of the AI era.

If you capture Middle East capital’s allocation logic, you capture the main investment theme of 2026 and even beyond. After experiencing the global shockwaves caused by short-term Middle East conflicts, China’s core assets that are relatively safer, more stable, and have value growth will continue to see an investment resonance with Middle East capital—and with global capital as well.