U.S. top officials speak out! Oil prices rise over 4%, China Coal Energy up over 4%, and the Energy ETF containing only 24 coal and oil stocks, Huaxin Wealth, rises over 2%! The proactive supply-side reforms combined with frequent black swan events are activating coal price potential.

Ask AI · How does the U.S. threat against Iran impact global energy market trends?

On April 2, the A-share market saw volatility; tensions in the Middle East tightened again; oil prices rose by more than 4%; and the energy sector surged. As of 10:23, the Huaxia Energy ETF (159930), which contains only 24 coal-and-oil stocks, was up by more than 2%.

The Huaxia Energy ETF (159309) target index constituent stocks were mostly among the top gainers; Jereh Co., Ltd. hit the daily limit; China Coal Energy was up more than 4%; China Shenhua and Yankuang Energy were up more than 2%; and Sinopec, Shanxi Coking Coal, and others also followed.

【Top ten constituent stocks of the Huaxia Energy ETF (159309) target index】

As of 10:23, the constituent stocks are shown for illustrative purposes only and do not constitute investment advice.

Today, senior U.S. officials made remarks, saying that over the next two to three weeks they will carry out extremely severe strikes against Iran. The goal is to destroy Iran’s ability to threaten the United States, to destroy its defense industrial base, and indeed Iran will no longer pose a threat. The U.S. has several options to strike Iranian oil, including seizing key energy facilities. They also stated that they do not need oil from the Middle East; they did not need the Strait of Hormuz in the past, and they do not need it now either. Once the conflict ends, the strait will naturally reopen.

【War risks have not yet eased, and the trajectory of the conflict still has significant uncertainty】

Galaxy Securities believes that war risks have not yet eased, and the trajectory of the conflict still has significant uncertainty. The core assumption is that if, at this time, the U.S. were to resolve the issue of navigation through the Strait of Hormuz via the TACO approach, it would be tantamount to acknowledging the reconstruction of the Middle East’s geopolitical order, which would cause a significant shock to the credibility of U.S. senior officials as well as the oil-dollar system. Next, the U.S. may continue to strengthen its deployment in the Middle East, seeking more negotiation leverage through even more forceful military suppression, and the possibility that the U.S. chooses ground combat is not ruled out.

There are three layers of impact on the capital markets:

In the short term, as long as the conflict’s trajectory remains unclear, risk-avoidance sentiment will still dominate, and there is also the possibility of another liquidity shock forcing the TACO scenario.

In the medium term, we need to consider how an upward shift in the inflation center affects fundamentals and monetary policy; the rate cuts by the Federal Reserve and the People’s Bank of China will be more subject to circumstances.

In the long term, compared with fiscal deficits, the world will place even more emphasis on “security deficits.” In the future, countries may make more efforts in terms of “coordinating development and security.” Construction needs such as energy security, food security, the security of the industrial chain and supply chain, national defense security, and cybersecurity will be significantly boosted. (Source: China Galaxy Securities 20260327, “Who Are Friends of Time? — The U.S.-Iran Conflict Unfolding and Asset Allocation Outlook”)

【Coal sector: Proactive changes in supply, plus frequent black swans—coal price upside is fully activated!】

Guosheng Securities points out that, through policy measures such as tightening the RKAB quota in Indonesia, restoring export tariffs, and increasing the domestic DMO proportion, the country has taken strong steps to achieve effective supply contraction. The aim is to prop up coal prices and increase fiscal revenue; this move will directly reduce effective supply in the global shipping market, squeeze the survival space of small and mid-sized miners, build a solid bottom for international coal prices from both the cost and supply sides, and at the same time weaken China’s cost advantage in importing coal. If this coincides with geopolitical conflict, it may catalyze a strong rebound in coal prices in 2026.

As the U.S.-Iran conflict continues to intensify, the blockade of the Strait of Hormuz has caused prices of shipping, crude oil, LNG, methanol, and other chemical products to surge. Against the backdrop of Indonesia reducing production, the logic for coal price increases is further strengthened, opening up the ceiling for coal price gains.

(1) When oil prices surge sharply & supply in oil-related regions such as the Middle East is constrained, domestic coal-to-chemicals will step in to fill the gap, further reinforcing the logic of coal price increases.

(2) A sharp jump in LNG prices will push the market to reassess the value of coal, lifting the bottom of coal prices. In addition, rising gas prices will also drive up the cost of coal-to-chemicals raw materials, further strengthening the cost advantage of coal-to-chemical products, stimulating demand for coal used in chemical applications, and ultimately forming the transmission logic of “LNG surges → substitution demand increases → high-calorific coal rises first, leading low- and mid-calorific coal to follow.”

(3) According to related reports such as the previously released “Cost (2024) — Full Analysis of Listed Companies (III)” and others, in the per-ton coal cost, the share of “raw materials, fuel and power” is roughly around 5%~25%, and the share of open-pit mines is even higher. Since oil and gas prices have risen sharply, whether for domestic mines or overseas mines, the per-ton coal cost is likely to be clearly raised, further reinforcing support for coal prices.

(4) Estimating that the share of freight costs in China’s CFR price is about 10%~20%, due to the continuous escalation of the U.S.-Iran conflict, the blockade of the strait directly leads to a sharp rise in shipping and crude oil prices. As a result, China’s CFR price will also rise accordingly, which in turn affects China’s level of seaborne coal imports, further reinforcing support for coal prices. (Source: Guosheng Securities 20260331, “Coal Depth: The trend is clear and the upside is wide open — A review and outlook for the 25-year global coal market”)

【Oil and gas sector: The core of oil-and-gas assets may shift upward, and there is still a risk of undervaluation】

CICC believes that market-implied forward oil price assumptions show an upward trend. With the global average crude oil price at $71 per barrel in 2021, the Brent 28-year futures contract was priced at $58 per barrel; while when the average crude oil price in 25 years was $68 per barrel, the Brent 28-year futures contract price had already been lifted to $70 per barrel, higher than the near-month price. Market consensus expectations for the forward end of oil prices are being raised year by year.

Chart: Upward trend in market expectations for forward oil prices

Source: Research Department of CICC

The oil price embedded in current market consensus is $70 per barrel. As of the close on March 16, CNOOC-H’s share price was HK$28.8, with the embedded forward oil price still at $70 per barrel (corresponding to a 5% dividend yield). But CICC’s view is that a reduction in supply caused by the obstruction of the Strait of Hormuz may be gradually reflected in changes to the market’s medium- and long-term expectations. Under the trend of raising the earnings bottom for oil and gas companies, assets may still have a risk of undervaluation.

【Medium- and long-term expectations affected by the strait’s obstruction.】 Considering the Saudi pipeline replenishment and the current global excess of 2 million barrels/day, under assumptions of three scenarios—conservative/neutral/extreme—the amount of global commercial crude oil stock loss in 1H26 due to strait navigation conditions is approximately 360/600/1,000 million barrels, corresponding to replenishment cycles of 180/300/500 days. And to push the market gradually back to balance before the conflict, oil and gas companies may need oil prices that are 5/10/15 dollars per barrel above the marginal cost line to stimulate increased production; over the medium and long term, the embedded oil price may have further room to rise to a $75/80/85 per barrel central level.

【Raising the bottom of forward prices provides room for re-rating the “strategic premium” of oil and gas assets.】 Based on changes in forward oil price expectations and the impact of the strait being blocked, our judgment is: taking the end of 27 as the medium term and the end of 30 as the long term, the reasonable embedded oil price central level for oil and gas assets may be at $80 per barrel and $85 per barrel. In addition, the strikes on production facilities in Gulf countries in this conflict may push the market to incorporate the strategic value of oil and gas assets into valuation, providing higher premiums to major economies, especially more asset-safety-oriented oil companies**. (Source: CICC 20260323, “Oil & Gas Chemicals: Analysis of the Impact of the Strait of Hormuz Situation on China’s Oil & Gas Chemicals”)

With geopolitical waves rising and black swans flying frequently, oil prices and coal prices are getting extra fuel! In addition, the “security cushion” created by high-dividend and undervalued valuations, the “anti-involution” policy, and a cyclical logic that catalyzes sector flexibility—energy sectors have both offense and defense! Core product energy ETF Huaxia Energy (159930) contains only 24 coal stocks + oil stocks; one click to capture opportunities in traditional energy investment, for a scarce offering across the whole market! There is only this one in the whole market!

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