CITIC Securities: Interpretation of the Impact of Continuous Oil Price Increases

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Source: Citic Securities Research

Driven by expectations of escalating Middle East conflict, international oil prices have surged significantly.

The Citic Jianze (CITIC CCB) Macro Research chief Zhou Junzhi team, the Chemical Industry Research chief Yang Hui team, the Global Energy and Transportation chief Han Jun team, and the Automobile chief Cheng Siqi team have released a series of studies on：【The Impact of Ongoing Sustained Rise in Oil Prices】:

A rebound in passenger cars’ trough is on the way; high oil prices bring a overseas demand “Davis double” boost

As oil prices continue to rise, market risk appetite moves downward; look for opportunities benefiting “mispriced” laggards

Oil prices lift price spreads, with inventories rapidly being worked off

A surge in oil prices reshapes asset pricing

International crude oil prices move higher in a volatile range, and oil majors are paying close attention to upstream exploration.

01 A rebound in the passenger car trough is imminent; high oil prices bring a overseas demand “Davis double” boost

At this point in time, in the first half of March, passenger car wholesale volumes were 648,000 units (YoY -20%, MoM +36%). The trough in February sales has basically been confirmed, and the trend of improving industry conditions quarter-over-quarter in March is clear. Commercial vehicle exports remain at high growth. For heavy trucks, Q1 is expected to deliver a “strong start.” The Physical AI sector is seeing a wave of dense catalysts: Nvidia’s GTC release of the Alpamayo 1.5 autonomous driving model, Tesla’s Optimus V3 fixed for mass production is imminent, Cybercab’s scale mass production to start in April, and the FSD push into China landing on the ground. Combined with developments such as XPeng’s second-generation VLA/WeRide’s Robotaxi expanding overseas, the current recommendation is to actively build positions along the technology main line.

At this point in time, in the first half of March, passenger car wholesale volumes were 648,000 units (YoY -20%, MoM +36%). The trough in February sales has basically been confirmed, and the trend of improving industry conditions quarter-over-quarter in March is clear. Commercial vehicle exports remain at high growth. For heavy trucks, Q1 is expected to deliver a “strong start.” The Physical AI sector is seeing a wave of dense catalysts: Nvidia’s GTC release of the Alpamayo 1.5 autonomous driving model, Tesla’s Optimus V3 fixed for mass production is imminent, Cybercab’s scale mass production to start in April, and the FSD push into China landing on the ground. Combined with developments such as XPeng’s second-generation VLA/WeRide’s Robotaxi expanding overseas, the current recommendation is to actively build positions along the technology main line.

Passenger cars: From March 1–15, wholesale volumes were 648,000 units. That is +36% quarter-over-quarter versus the same period last month, and the signal of a rebound from the trough in industry conditions is clear. This week, important events are densely packed: Xiaomi’s new generation SU7 is officially launched (CNY 219,900–303,900), XPeng releases four replacement models—P7+/G7/G6/G9—and is the first to roll out its second-generation VLA intelligent driving system; BYD’s second-generation Blade Battery + 9-minute fast-charging technology is rolled out; and Li Auto (Li AUTO) will list on the Hong Kong Stock Exchange on 3/19. On the export side, cumulative volumes in January–February were 1.532 million units (YoY +58%), and新能源 exports have continued to exceed expectations. The current sector has already fully priced in “weak reality.” As high oil prices continue, overseas新能源 penetration could exceed expectations. Domestic automakers’ export shares are generally around 20%–30%; overseas is expected to become the second growth curve starting in 2026.

Commercial vehicles: In Q1, the industry conditions for heavy trucks and passenger buses are continuing to stay strong. Heavy truck wholesale volumes in March are expected to be 1.15–1.2 million units, with exports expected at 280,000–300,000 units (YoY +24%); cumulative exports in the quarter are expected to reach 850,000–900,000 units. Passenger bus exports continue to grow strongly, with YoY +98% for January exports of mid- to large-sized buses. In 2026, the two major segments of heavy trucks and passenger buses are expected to benefit from policy-backed domestic demand support plus continued overseas cyclical improvement; it is recommended to focus on leading companies with low valuation and strong performance.

Risk disclosures:

1. Industry conditions are not as strong as expected. Although China’s domestic economic recovery in 2026 is expected to improve, the specific timing still needs to be observed. Demand in the auto industry may fluctuate accordingly. Slower consumer income growth or expectation volatility will also affect the effectiveness of “trade-in and replacement” promotions. Insufficient demand in the passenger and freight markets will likewise constrain the ratio of commercial vehicle scrappage and replacement, ultimately affecting the pace of auto industry recovery.

2. The effects of policy implementation are not as expected. It will still take time for the trade-in and replacement policy for consumer goods and the equipment upgrade policy to fully land. Policy communication and information dissemination also require some time. Whether subsidy funds can be issued consistently and whether replacement demand can be released smoothly are both matters that need continued observation.

3. Exports and sales volume are not as expected. Export performance is influenced by multiple factors such as international situations, national policies, and exchange rates, creating a risk of overseas sales growth volatility.

4. Deterioration of industry competition pattern. Under the trend of automotive electrification and intelligence, domestic automakers and component suppliers are racing to lay out. With changes in supply factors such as technological progress and new capacity additions, future industry competition may intensify, and market share and profitability of automaker and component enterprises may experience fluctuations.

5. Customer expansion and new project mass production progress are not as expected. Under the trend of automotive electrification and intelligence, the existing automaker and component supply-chain landscape is being reshaped. Component companies that gain new customers and incremental volume from new projects are expected to benefit, while some component companies’ market share may be affected.

Report source

Name of the securities research report: 《A rebound in the passenger car trough is imminent; high oil prices bring a overseas demand “Davis double” boost》

External publication date: March 23, 2026

Publishing organization: Citic Jianze Securities Co., Ltd.

Report analysts:

Cheng Siqi SAC No.: S1440520070001

Tao Yiran SAC No.: S1440518060002

Chen Huaishan SAC No.: S1440521110006

Ma Boshuo SAC No.: S1440521050001

Hu Tiangou SAC No.: S1440523070010

Li Yuewan SAC No.: S1440524070017

Cai Xinghe SAC No.: S1440526010001

Zhao Hanzhi SAC No.: S1440525070015

Bai Ge SAC No.: S1440525080001

02 Oil prices continue to rise, market risk appetite moves down; find opportunities benefiting from “mispriced” names

This week (3.16–3.20, same applies throughout this section), among the 142 chemical products we track, the diffusion index (the share of categories with weekly month-over-month price increases) reached 49.30%, down 15.64% month over month. By category, we believe the upward move in oil prices has begun to transmit into midstream products. We think that, from a medium-term perspective, China’s chemical industry’s relative competitive advantage versus the world is strengthening; and from the standpoint of market risk appetite, it is also more favorable for HALO assets with a profit base. As the market starts to contract risk appetite (as reflected by the large-scale ETF redemptions), against the backdrop of ETFs indiscriminately cutting allocations, assets with clear and definite benefits (crude oil, coal-chemical, etc.) and core chemical assets with strengthening relative competitive advantages actually face favorable configuration opportunities.

Previously, the market expectation was that the PPI would turn positive around mid-year. Once the main economic storyline becomes clear, price increases from improving supply-demand dynamics for “big” categories may become more certain, thereby driving a major upward move in second-half earnings. Overall, over the two years following the reversal of the supply-demand direction after the cumulative capital expenditure in chemicals turned negative in June 2025, the overall probability is extremely high. However, different categories may start at different times depending on their specific supply-demand balance sheets. But as oil prices at the trough rise and drive inventory reduction and price increases, with upstream supply contracting and downstream restocking moving forward, the PPI turning positive is likely to occur earlier. A new inventory cycle is being initiated. It will be necessary to pay even more attention to categories with structural supply shortages caused by disruptions to the Iranian situation, such as ethylene, propylene, aromatics, butadiene, etc.

The “price-increase theme” follows the annual routine of “Golden Three, Silver Four.” This year, the price-increase categories in H1 still mainly seek price increases through a logic of supply resistance. On one hand, it considers transmission of upside oil price risk. On the other hand, it is along the “anti-involution” categories that the market has already been paying attention to (such as long fibers, organic silicon, glyphosate, caprolactam, etc.). At the same time, especially this year, it is important to focus on some “small categories”/byproducts that may be the first to emerge from a price-increase wave, such as dyes, food additives, and pesticides. Generally, small categories tend to experience supply-demand misalignments earlier than big categories, and companies’ pricing strategies are also more likely to shift. Dual carbon is also a policy catalyst that needs attention during the Two Sessions. Since this year, dual carbon has accumulated solid market recognition and popularity; during the Two Sessions it is expected to become a preferred option in terms of market aesthetics. Our understanding of dual carbon is that its core is to resist involution. Based on the dual carbon framework constraints, it restricts disorderly capital expenditures, helps move out of deflation, and restores rational profitability in manufacturing.

The Iran–U.S. conflict pushes up oil prices; we emphasize re-assessing the strategic importance of coal-chemical energy security, as well as price-increase and arbitrage opportunities for small chemical categories. 1) Oil–coal arbitrage: Geopolitical risk lifts oil prices, while most coal-chemical products compete using petroleum derivatives as feedstock. Against the backdrop of the oil–coal price spread widening, the industrial chain of “coal-head” products clearly benefits. 2) Energy security status of Xinjiang coal-chemical: After geopolitical risks grow increasingly severe, oil-and-gas production from coal-chemical based on coal resource endowments will again receive national strategic-level attention. Its economics have distinct advantages and it is also expected to benefit from the national strategies of dual carbon and developing new quality productive forces. Looking further out, combined with the rapid development of Xinjiang’s new energy, Xinjiang may become China’s energy hinterland. 3) Price-increase opportunities arising from European supply-chain risks: Europe’s natural gas prices have surged, pressuring chemical product costs. For additive-type small products, downstream cost share is low and price increases have a good foundation. From food additives like methionine and vitamins to plastic additives like anti-aging agents, price increases have already begun to materialize.

This week, the Citic Jianze Chemicals industry index was 108.31, up 3.28% month over month, and up 28.93% year over year. The industry price percentile was 39.09% over the past 10 years, up 1.91% month over month. The industry price spread percentile was 14.40% over the past 10 years, down 1.31% month over month. Industry inventories percentile were 75.33% over the past 5 years, down 2.53% month over month. Industry utilization rate was 67.94%, down 0.21% month over month. Categories with leading price increases this week were: vitamin A (+34.4%), ethylenediamine (+32.8%), ethylene (+29.0%), choline chloride (+28.7%), and synthetic ammonia (+15.3%). Categories with leading price declines this week were: n-butanol (-12.1%), C4 (-7.8%), acrylic acid (-7.1%), maleic anhydride (-5.9%), and yellow phosphorus (-5.4%). The top five categories by utilization rate this week were: 1-octanol (115.9%), naphtha (107.0%), mancozeb (96.2%), chlorothalonil (94.3%), and 1-butanol (94.0%); categories with leading utilization rate increases this week were: potassium chloride (10.5%), sucralose (7.5%), compound fertilizer (5.7%), TDI (5.2%), and R125 (5.2%).

This week, the leading price increases were for vitamin A (+34.4%), ethylenediamine (+32.8%), and ethylene (+29.0%). 1) Vitamin A (+34.4%): This week, vitamin A’s market average price was CNY 87.2 per kilogram, up 34.4% month over month. Early-week trading for vitamin A was strong in the market. Delivery from manufacturers remained tight. In addition, spot inventory in trade channels was on the low side. In the second half of the week, trading market prices rebounded upward again. Although transaction progress for new high-priced orders still needs further advancement, channel dealers once again held firm on prices and were reluctant to sell, showing confidence in a bullish outlook. 2) Ethylenediamine (+32.8%): This week, the market average price of ethylenediamine was CNY 17,000 per ton, up 32.8% month over month. In terms of costs, this week’s ethylene prices jumped sharply, and some auxiliary materials also rose slightly, further squeezing manufacturers’ profit margins, prompting factories to raise ex-factory quotations. Some domestic mainstream manufacturers, such as those in Ningbo and Lianyungang, arranged routine maintenance during this period or reduced load due to technical reasons. 3) Ethylene (+29.0%): This week, the market average price of ethylene was $1,302.0 per ton, up 29.0% month over month. During the week, the international crude oil market was dominated by geopolitical conflicts in the Middle East, and international oil prices rose in a volatile manner. Ethylene production costs were high; production companies generally operated at reduced loads. On-site ethylene supply decreased, supplier quotations rose, and the focus of negotiations for new deals moved higher. Downstream acceptance of high-priced ethylene was limited, so replenishment was mainly driven by rigid demand. Supply and demand remained in a tight balance.

At the starting point of a new cycle, oil refining and chemical processing sector allocation is timely. During deglobalization, resource nationalism rises and resource prices take off. As the transmission of commodity inflation to industrial goods inflation occurs, some industrial goods assets are re-priced. Large refining and chemical processing sits at the starting point of a new cycle. On the supply side, the refining and chemical processing industry faces the withdrawal of old and inefficient capacity in Europe, Japan, and South Korea. After China’s refining capacity focused on chemicals reaches its peak, incremental supply is limited. In addition, chemical demand remains on a sustained growth trajectory, so the revaluation of China’s refining and chemical processing assets has already begun. For chemical products, capacity growth slowdown is being reflected in wider price spreads. In aromatics, after the slowdown in capacity growth, in 2025 Q4, overseas demand for oil refining is amplified for PX demand; the start of PTA anti-involution has begun, and the reversal in aromatics products such as PX and PTA has already shown in the price end. Looking ahead, with limited incremental capacity for PX and PTA, continuous release of downstream demand such as long fibers will support a trend of structural repair in aromatics price spreads. In olefins, domestic olefins capacity growth is expected to slow due to policy guidance toward anti-involution; meanwhile major multinational companies in the US/Middle East face a clear weakening in capital expenditure willingness due to the obvious decline in olefins profitability. We believe that the capex peak after 2021 and the subsequent period of high supply growth rates are approaching a turning point. Considering that the ethylene and propylene production from naphtha has been in a loss-making state for a long time, profit elasticity in the olefins segment is worth expecting. From the valuation perspective, the market’s repair of olefins profitability still needs to be priced.

The United States includes elemental phosphorus and glyphosate in defense critical supplies, highlighting the strategic attributes of phosphorus resources. On February 18, Trump signed an executive order, citing the Defense Production Act to include elemental phosphorus (elemental phosphorus) and critical herbicides such as glyphosate in defense critical supplies, and clearly requiring that any implementing rules must not jeopardize domestic producers’ continued operating capability. Previously, in November 2025, the U.S. Department of the Interior and USGS newly included phosphate rock in the list of critical minerals. From a policy level, the U.S. directly links phosphorus—an essential agrochemical element—to national security and food security. Directly, the executive order significantly benefits the United States’ sole glyphosate producer, Bayer, reducing litigation risk for its glyphosate business. Indirectly, from phosphate rock to phosphoric acid/elemental phosphorus to terminal phosphate fertilizers and phosphorus-containing pesticides, the scarcity and strategic attributes of the entire phosphorus chemical industry chain have increased noticeably. As China is a major global participant in phosphate fertilizers and phosphates trade, it is expected to benefit from the global re-pricing of phosphorus resources. High-quality phosphorus chemical/phosphate targets in China with scale, cost, and safety compliance advantages are expected to benefit as well.

Polyester filament yarn: Improved supply-demand dynamics provide downside support; long fibers + PTA double anti-involution accelerates an upward move in industry conditions. After years of cycle fluctuations, the polyester filament yarn industry has a relatively concentrated pattern. The top three firms have market shares of over 60%, and the six listed companies have market shares of over 80%, giving it a solid foundation for anti-involution. From a supply-demand perspective, over the past two years the pace of capacity expansion has already slowed significantly and is far below demand growth. Supply-demand dynamics continue to improve, and industry utilization rates have been restored to historically high levels. In addition, in September 2025, the Ministry of Industry and Information Technology, together with six listed companies, held an anti-involution meeting for the PTA industry. Some companies have already responded by halting production. Since PTA companies and filament yarn companies basically overlap, anti-involution experience from the polyester filament yarn industry can be effectively referenced. PTA and polyester filament yarn are expected to see significant profit elasticity driven by the double anti-involution, and this will also squeeze market share for companies that do not have PTA–polyester filament yarn integration.

Dyes: Industry supply discipline and concentration have improved during the earlier downturn period. As leading companies gain pricing power in dye scarcity segments, and with rising raw material costs driven by price increases in 2026 such as sulfuric acid, the dye industry is gradually moving toward a concentrated pricing logic. Industry conditions and key product prices continue to rise. For dispersed dyes and reducing agents, price-holding willingness is strong, and they may expand into other key intermediates in other dye segments such as p-phenylenediamine and H-acid.

The《Work Plan for Stabilizing Growth in the Petrochemical and Chemical Industry (2025–2026)》has been released, and industry transformation and upgrading are expected to accelerate. On September 26, the Ministry of Industry and Information Technology and seven other departments issued the《Work Plan for Stabilizing Growth in the Petrochemical and Chemical Industry (2025–2026)》. The main goals are: in 2025–2026, the added value of the petrochemical and chemical industry will grow by an average annual rate of over 5%, economic benefits will stabilize and recover, and industrial science and technology innovation capabilities will be significantly enhanced. Fine-grained downstream extension, digital empowerment, and the level of inherent safety will continue to improve. Coordination and efficiency in reducing pollution, lowering carbon emissions, and improving efficiency will be notable. Chemical industrial parks will move from standardized construction to high-quality development. The plan requires scientifically regulating major project construction. Strengthen guidance on planning and layout for major petrochemical and modern coal-chemical projects, strictly control new oil refining capacity, reasonably determine the scale and deployment schedule of new ethylene and para-xylene capacity, and prevent risks of excess capacity in coal-to-methanol industries. In the petrochemical field, strict compliance with the requirement for capacity reduction-and-replacement for newly built oil refining projects is required. Priority support will go to renovation of old and outdated petrochemical facilities, demonstration of industrialization of new technologies, and existing refining and chemical processing companies’ projects of “reducing oil and increasing chemicals” (減油增化). In the modern coal-chemical field, efforts will focus on regions with relatively abundant coal and water resources and good environmental capacity, and appropriately deploy coal-to-oil and-gas and coal-to-chemical products projects. It will carry out demonstration of industrialized applications such as coupling coal-chemical with new energy, advanced materials, technology equipment, and industrial operation systems, as well as demonstration projects for carbon dioxide capture, utilization, and storage engineering. Accelerate implementation of projects such as natural gas helium extraction and seawater potassium extraction. We believe that under policy support, industrial science and technology innovation capabilities are expected to be strengthened, new market and application demand may be expanded, and the supply side is expected to be scientifically regulated, so transformation and upgrading in the petrochemical and chemical industry may accelerate.

Focus on valuation elasticity in fluorine, silicon, and phosphorus industries. Chemical industry “bull stocks” have always required both the earnings elasticity from the chemical industry and the valuation premium from capital flowing into specific tracks. Based on the position of oil prices, incremental supply, marginal demand, cycle strength, and policy impacts, we believe that in the internal track-ranking within chemicals, fluorine, silicon, and phosphorus should be given the highest priority: from the perspective of oil prices, fluorine, silicon, and phosphorus are not sensitive to the high-oil-price positioning in this cycle; from the perspective of supply, incremental supply over the next two years for fluorine, silicon, and phosphorus chemical products is relatively low; from the perspective of demand, organic silicon and glyphosate are expected to see an inventory-upward cycle, while fluorine fine chemicals are expected to have opportunities at a capacity-cycle level driven by semiconductors and AI materials. These three sub-sectors are expected to generate new “star” products in the next cycle.

Re-pricing resources—that is a directional choice. Taking 2020 as the starting year. Looking ahead over the next 5–10 years, we need to make a directional judgment: advantages on the resource end will become prominent and amplified. With the combined restrictions of carbon neutrality, dual control of energy consumption, and various supply-side controls of capacity indicators, we will see some resource-endowment-leading companies—especially local state-owned enterprises—in traditional industries such as coal-chemical, salt-chemical, and phosphorus-chemical, or in industries where capacity like industrial silicon and calcium carbide gradually becomes resource-property based, will show stronger competitive advantages. And relying on state-owned enterprises with strong resource endowments, and with the deepening of SOE reforms in recent years, they also have the potential to regain stronger vitality.

Risk disclosures:

(1) Crude oil prices move up or down beyond expectations: Large fluctuations in crude oil prices will affect price spreads and earnings stability across downstream industry chains, thereby affecting the profitability of some segments or companies; (2) Changes in the industry competitive landscape: There are many domestic refining and chemical supporting projects, which may cause localized excess capacity in certain product segments, thereby intensifying industry competition and squeezing profit margins for industry participants; (3) Macro-economic fluctuations and global economic downturn: Downstream branches of refining and chemical products are numerous and widely distributed, with a relatively high correlation to macroeconomic conditions. An economic downturn may impact industry product demand.

Report source

Name of the securities research report: 《Chemicals: Oil prices push up price spreads, with inventories rapidly being worked off》

External publication date: March 30, 2026

Publishing organization: Citic Jianze Securities Co., Ltd.

Report analysts:

Yang Hui SAC No.: S1440525120006

Zheng Yi SAC No.: S1440526030007

Wang Xianli SAC No.: S1440526030003

Wu Yu SAC No.: S1440526030001

Shen Qihao SAC No.: S1440526030008

Chen Junxin SAC No.: S1440526030009

04 A surge in oil prices reshapes asset pricing

The Iran–U.S. conflict, unexpected at the beginning of the year, changed the global recovery trade. Oil prices have jumped by 35% in a single week—reshaping the global liquidity main line and triggering repricing across nearly all assets.

At the start of the Iran–U.S. conflict, capital markets’ risk-aversion pricing mode gradually shifted into a stagflation (sluggish growth with inflation) mode as uncertainty around disruptions to the Strait of Hormuz increased.

The latest nonfarm payroll report unexpectedly recorded negative growth, coinciding with the sudden surge in oil prices; the “stagflation” narrative in the U.S. began to spread.

The Strait of Hormuz involves interests of multiple countries: the U.S.’ control over the Middle East, energy costs for East Asia and Europe, fiscal revenue of Gulf countries, and more.

This means the Iran–U.S. conflict is not easy to end at any time. But precisely because the Strait of Hormuz involves the interests of multiple countries, continued and widespread disruptions have kept oil prices hovering above 100; the probability of easing is also not high.

A more likely scenario is that shipping through the Strait of Hormuz cannot return to the way it was in the past, and global oil prices will need to pay a “friction premium.” What is truly worth focusing on is the long-term impact on the global outlook from an upward shift in the oil price center.

This week (3.2–3.6, same applies throughout this section), a snapshot of global major asset performance:

A-shares: affected by the Iran situation, they first fell with heavy volume and then recovered; the Shanghai Composite Index fell slightly by 0.93% for the whole week.

Hong Kong stocks: underwent a sharp adjustment; the Hang Seng Index fell 3.28%.

U.S. stocks: driven by a triple shock—war escalation in Iran, a surprise in nonfarm data, and private credit risks—the S&P 500 fell 2.0% for the week, while the VIX surged 48.5% to 29.5.

China’s bond market: volatile but leaning strong. The 10Y government bond yield fell 1.3 bp to 1.79%. U.S. Treasury yields rose across the board, with the 10Y up to 4.13%, and yields in the UK, Japan, and Germany also rose in sync.

Crude oil experienced a historic week: shipping in the Strait of Hormuz was nearly halted, and WTI surged 35.6% to $90.9 per barrel. Gold fell 2.09% due to inflation expectations weighing on it; copper declined 3.59% under pressure.

The dollar’s safe-haven strength rose. The DXY moved up 1.4% to 98.99. The RMB depreciated; onshore closed at 6.90 and offshore at 6.91.

I. Chinese equity markets: Due to the tense situation surrounding Iran, A-shares first dropped with increased trading volume and then rebounded to repair.

A recap of China’s AH shares this week.

A-shares: Due to the tense situation surrounding Iran, the market saw heavy-volume selling this week, followed by a rebound and repair. In terms of industry performance, most sectors declined, while oil & petrochemicals, coal, power, and utilities led. Media, computers, and non-ferrous metals led the declines.

H-shares: H-shares adjusted this week. The Iran–U.S. conflict continued to intensify, raising global risk-aversion sentiment and leading to major adjustments in both the Hang Seng Index and Hang Seng Tech Index. By subsector, the oil price surge boosted energy and oil & gas-related stocks; however, tech and non-ferrous metals that had rallied earlier showed weaker performance.

Outlook for China equity markets.

A-shares: With tensions in the Middle East continuing, the New York WTI crude futures crossed above $90 late Friday night. Recent performance in stocks, bonds, and FX all indicates that the market has begun to show more concern about Iran situation becoming entrenched. In the short term, risk appetite may continue to cool, and high-valuation growth sectors may be dragged down by sentiment. Capital will focus on the safe-haven and resource main line catalyzed by the geopolitical conflict.

H-shares: In the short term, the current valuation of Hang Seng Tech has again moved down to a historically low level. However, there is substantial uncertainty about the impact on the economy from the escalation of the Iran–U.S. conflict and the oil price surge. If the situation becomes clearer and sentiment improves, Hong Kong stocks could see a round of recovery. Still, the durability of the rally needs to be monitored—especially the persistence of the current upward oil price move and the pressure it may bring to the global economy. In the current market environment, dividend/beneficiary sectors are worth watching.

II. China bond market: The bond market was volatile but generally strong this week.

Recap of the bond market: This week, the bond market was volatile but leaned strong. Key factors affecting it include overseas geopolitical conflicts and expectations for the Two Sessions policies. Short-end performance was stronger than long-end. After 10Y government bond yields broke above 1.8%, further downside momentum was insufficient. The 2Y government bond yield fell 2.75 bp to 1.33% this week. The 10Y yield fell 1.3 bp to 1.79%. The 30Y yield fell 2.05 bp to 2.23%.

Outlook for the bond market: As the Two Sessions policies have initially taken effect, expectations for near-term liquidity easing cooled. With a combination of fiscal efforts and economic growth expectations, we expect the bond market to maintain a volatile pattern.

III. U.S. stocks: War shocks layered with nonfarm payroll surprises; the S&P 500 fell 2.0% for the week and the VIX rose to 29.5.

Recap of U.S. stocks: This week, U.S. stocks were hit by four factors: escalation of the Iran war, renewed tariff risks, nonfarm employment far below expectations, and a liquidity crisis in private credit funds. Volatility increased significantly. As of close Friday, the S&P 500 was 6,740 points, down 2.0% for the week. The Dow fell 3.0% to 47,502. The Nasdaq Composite fell 1.2%. The Russell 2000 plunged 4.1%.

By sectors and individual stocks, the energy sector benefited from the oil price surge, becoming the only sector with a clearly positive contribution. The tech sector showed relatively strong resilience, and the Nasdaq’s decline was smaller than that of the S&P. The financial sector faced clear pressure due to concerns about liquidity in private credit; the stock price of BLK fell 7.2% on Friday to the lowest level since May last year. Small-cap stocks were under notable pressure, with the Russell 2000 down more than 4% for the week. The VIX fear index jumped from 19.9 to 29.5, a rise of 48.5%.

Outlook for U.S. stocks: Next week’s trend depends heavily on the evolution of the Iran/Hormuz situation. If the conflict de-escalates, falling oil prices will drive a rebound in risk assets; historically, the average first week drop in the S&P 500 due to geopolitical shocks has been 4%, but it typically recovers within the following month. If the conflict escalates, sustained high oil prices will trigger a full-scale stagflation trade. In terms of style, energy and value may continue to outperform tech growth. Additionally, risks in private credit funds and the timing of new tariffs being implemented are worth continued monitoring.

IV. Offshore interest rates and FX: The oil price shock pushed interest rates up sharply across the week; after the nonfarm surprise, short-end rates eased slightly on Friday.

Recap of offshore rates and FX assets.

This week, U.S. Treasury yields rose across the board under the “inflation fear” triggered by the oil price surge. As of close Friday, yields for 2-year, 5-year, 10-year, and 30-year U.S. Treasuries were 3.56%, 3.72%, 4.13%, and 4.76%, respectively—up 17bp, 20bp, 17bp, and 12bp for the week. The main driver was the inflation repricing triggered by the oil price surge. After Friday’s nonfarm surprise, short-end rates fell slightly, but it did not change the overall pattern of yields rising across the week.

The rise in yields showed a “bear flattening” characteristic: the magnitude of increase in the mid-to-short end (17–20bp) was greater than on the long end (12bp), reflecting market pricing for higher inflation and the Federal Reserve delaying rate cuts.

This week, affected by the oil price surge, 10-year government bond yields in the UK, Japan, and Germany generally rose. Among them, UK bond yields rose 33bp to 4.6%, Japanese bond yields rose 8bp to 2.18%, and German bond yields rose 20bp to 2.86%.

On FX, the U.S. Dollar Index rose 1.4% for the week to 98.99. The dollar strengthened as the preferred safe-haven currency for this round of geopolitical shock. Besides safe-haven demand, the U.S. is also a net energy exporter, and there had been crowded short positions in the dollar. Driven by rising energy prices, the euro and Japanese yen weakened. After the Friday nonfarm payroll surprise, the dollar pulled back slightly (DXY from 99.32 to 98.99), but it still recorded gains for the week.

Outlook for offshore rates and FX.

From late last year to early this year, U.S. Treasury yields began pricing in improving economic conditions and a slowing pace of rate cuts. This broadly aligns with our assessment in our annual report that the economy would stabilize and that the downside room for U.S. Treasury yields is limited. In February, the main line for U.S. Treasury yields was growth concerns and safe-haven demand triggered by the AI disruption. However, this week’s sharp oil price surge caused the rates market to quickly shift toward a more hawkish inflation dimension.

Looking ahead, we believe that for short-end rates, rate-cut expectations for the rest of the year have already been compressed significantly, leaving limited room for further upside. After the nonfarm data was released on Friday, downside risks in the employment market re-emerged, which is likely to let the short-end rates after Friday’s nonfarm soften further.

For the long end, we believe the pricing for long-end U.S. Treasury yields is roughly reasonable. With the rise in term premium, 4% could become the new center for 10-year U.S. Treasury yields. If oil prices continue to rise, the inflation premium will keep pushing up yields, and the 10-year may continue to test higher levels, around 4.2%–4.3%.

Outlook for non-U.S. interest rates: In the near term, the situation in Iran is not clear. Trump’s rejection of Iran’s “escalation ladder” step, with a clear demand that Iran surrender unconditionally, will keep the market concerned about the risk of a disruption to the Strait of Hormuz. The short-term risk for non-U.S. rates is trending upward.

As for FX: If the conflict is resolved quickly, the euro and cyclical currencies may rebound; if it continues, the currencies of Asian energy importers will be the most fragile.

Next week, key focus will be on February’s U.S. CPI data and speeches by Federal Reserve officials before the FOMC silent period.

V. Commodities market: The energy sector experienced a historic surge.

Recap of commodities this week.

This week, the global commodities market showed a clearly differentiated pattern. Geopolitical events became the dominant factor. The crude oil market experienced a historic week, and the global market switched to a “safe-haven + stagflation” mode.

First, crude oil experienced a historic week: due to a sharp escalation of geopolitical tensions in the Middle East, shipping through the Strait of Hormuz was nearly disrupted. The market estimated that nearly 20% of Middle East crude oil exports were obstructed.

Second, gold prices were affected by multiple factors. On one hand, unexpectedly weak U.S. employment data warmed market expectations again for Fed rate cuts. On the other hand, the strong rise in the dollar limited the upside.

Third, as market turmoil was triggered by the expansion of the Iran–U.S. conflict, energy supply shocks rapidly pushed up global inflation expectations, forcing the Fed to delay its rate-cut path, while copper prices fell under pressure.

Global commodities outlook.

Gold: In the short term, focus on how inflation expectations further disrupt global liquidity; gold’s rebound room is limited.

Crude oil: The crude oil market has shifted from fundamentals-based pricing to crisis-based pricing. Future direction will depend heavily on whether the Strait of Hormuz remains open and how the geopolitical situation evolves.

Copper: In the short term, copper prices face a dual pressure from geopolitical risks and inventory pressure.

Risk disclosures:

Risks of further escalation in Middle East geopolitical conflict. If Iran worsens and the Strait of Hormuz faces prolonged disruption, oil prices could break through 100 USD per barrel, triggering global stagflation risk, dragging down economic growth and suppressing valuation of risk assets. Uncertainty in U.S. tariff policy. The global 15% tariff implementation schedule and new investigations under Section 232 could further intensify trade frictions, push up import costs and inflation expectations, and impact global supply chains and corporate earnings.

Liquidity risk spreading in private credit funds. If more funds trigger redemption restrictions or are forced to sell assets at a discount, it could lead to a broader contagion in credit markets, impacting the financial sector and overall market risk appetite.

Domestic economic recovery underperformed expectations. Uncertainty remains about the sustainability of the recovery in consumption and real estate. If demand remains weak, the momentum for economic rebound will clearly weaken.

Greater uncertainty about the Fed’s rate-cut path. With oil price shocks combining with volatility in employment data, the timing of monetary policy could fluctuate again, creating disturbances to global liquidity and asset pricing.

Report source

Name of the securities research report: 《Oil prices surge and reshape asset pricing —— Weekly viewpoint on global major asset classes (94)》

External publication date: March 8, 2026

Publishing organization: Citic Jianze Securities Co., Ltd.

Report analysts:

Zhou Junzhi SAC No.: S1440524020001

Jiang Jiaxiu SAC No.: S1440525050001

05 International crude oil prices move higher in a volatile range; oil majors emphasize upstream exploration

1) In this cycle (2.12–2.25), international crude oil prices moved higher in a volatile range, with the weekly average price up month over month. WTI rose 1.36% to $64.83 per barrel, while Brent rose 1.83% to $69.82 per barrel. The spot price spread for Middle East crude oil fell, and buying and selling activity in Asia-Pacific was active. On the supply side, OPEC+ maintained production stability in Q1; market expectations for increased production in April warmed up. The impact after the U.S. and Israel’s attacks on Iran should be watched. On the demand side, improving U.S. economic conditions support demand, and India may reduce purchases of Russian oil. In inventories, U.S. commercial crude oil and Cushing inventories increased by 15.989 million barrels and 0.881 million barrels month over month, respectively.

2) Major oil companies adjusted their development strategies: shifting from prioritizing shareholder returns to increasing investment in oil and gas exploration. The core is to judge that global demand for oil and gas will continue over the coming decades. The earlier forecast that oil demand had topped was not realized; the adoption of electric vehicles only slowed oil demand growth, rather than ending it. Oil companies will prioritize expanding reserves and supporting capacity. Development patterns differ across regions due to climate policies. We forecast opportunities for the oil and gas upstream in 2026; energy prices may remain weak in the short term and rebound later.

In this cycle (2.12–2.25), international crude oil prices moved higher in a volatile range, with the weekly average price up month over month. The WTI average was $64.83 per barrel, up 1.36% versus the prior period. Brent’s average was $69.82 per barrel, up 1.83% versus the prior period. In the Middle East crude oil market, spot price spreads for different grades of crude oil fell. In the Asia-Pacific market, crude oil trading remained active, and Indian oil companies released tender documents to request crude oil purchases. On the supply side, OPEC+ maintained steady production in Q1; market expectations for increased production in April warmed up, and the impact after the U.S. and Israel’s attacks on Iran should be watched. On the demand side, positive U.S. economic data supports crude oil demand, and India may reduce purchases of Russian oil, lifting spot premiums. In inventories, as of February 20, U.S. commercial crude oil inventories rose by 15.989 million barrels week over week to 440 million barrels, and Cushing inventories rose by 0.881 million barrels week over week to 24.899 million barrels.

In recent years, large oil companies have adjusted their development strategies, shifting from prioritizing shareholder returns to increasing investments in oil and gas exploration. The core reasons are: first, the top forecast for oil demand by multiple institutions has not materialized. In some regions, electric vehicle adoption has also only slowed—not terminated—oil demand growth, and even some areas have plans to restart gasoline-engine models. Second, oil companies have increasingly made expanding oil reserves and supporting capacity expansion the key focus of their development. Some firms consider increasing reserves quickly through acquisitions. Development patterns differ across regions due to differences in climate policies. Related forecasts indicate that the oil and gas upstream sector will see development opportunities in 2026. Energy prices may remain weak in the short term and are expected to rebound afterward.

Risk disclosures:

Global trade risks amid continued escalation of the Russia–Ukraine conflict

With the Russia–Ukraine conflict remaining stalled and continuing, it will seriously affect trade in routes related to Europe and Russia, and could lead to the collapse of the global shipping system. There is even a risk of regression for globalization. Investors are advised to closely monitor developments in the battlefield, energy policy, and sanction dynamics.

Global macroeconomic recovery falls short of expectations

Under multiple factors such as escalation of geopolitical conflicts, increased supply-chain challenges, and sustained rising inflation pressure, uncertainty in global economic recovery remains. Recovery is still difficult. If global macro recovery falls far short of expectations, global logistics and transportation demand may drop significantly.

Logistics prices affected by changes in policy regulation

In September 2022, the General Office of the State Council issued《Opinions on Further Optimizing the Business Environment to Reduce Institutional Transaction Costs for Market Entities》, which proposes to promote reducing logistics service charges, and to strengthen supervision of charges in freight fields such as ports, cargo yards, and dedicated lines, and to regulate shipping companies, freight forwarding companies, and cargo forwarding companies’ charging practices in accordance with law. Logistics prices may be impacted by changes in policy regulation beyond expectations, leading to fluctuations in logistics companies’ performance.

Fuel costs rise sharply

Driven by volatility in international crude oil prices, logistics companies face the risk of large increases in fuel costs. Second, instability in the international energy market caused by the Russia–Ukraine conflict increases pressure on domestic energy security guarantees, with a risk of substantial increases in energy prices, leading to similarly sharp rises in logistics companies’ costs.

Report source

Name of the securities research report: 《Logistics: International crude oil prices move higher in a volatile range; oil majors emphasize upstream exploration》

External publication date: March 3, 2026

Publishing organization: Citic Jianze Securities Co., Ltd.

Report analysts:

Han Jun

SAC No.: S1440519110001

SFC No.: BRP908

Liang Xiao

SAC No.: S1440524050005

Zong Feng

SAC No.: S1440525120004

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