Read the research report | If high oil prices are not just a "short-term phenomenon"

Ask AI · Which industries may benefit against the trend when oil prices are high?

The Middle East situation remains the most closely watched issue in the current capital markets, especially as the Strait of Hormuz blockade has not seen any substantial easing to date. This key waterway, which carries about one-fifth of global oil transportation, continues to hang over the blade-edge of geopolitical gamesmanship. This has also prompted the market to re-examine a core question—if high oil prices are not just a “short-term phenomenon.”

It’s precisely because of this line of thinking that may be related to the market’s earlier assumption that high oil prices were only a temporary phenomenon. But now, this premise is being reconsidered.

A report by Huatai Securities notes that the price increases in raw materials represented by energy and the duration of “hard gaps” (i.e., the length of the Strait blockade) have a nonlinear relationship. Losses from the gap becoming long-term will rise nonlinearly. In pessimistic scenarios, the world will have to achieve supply-demand rebalancing through some form of demand reduction.

A report by CICC states that, with time passing, if the market comes to realize that the impact will gradually shift from prior “paper concerns” at the level of sentiment and trading to “actual shocks” to production and daily life, then the impact on the economy and the drag on earnings will also need to be re-priced. For example, since the outbreak of the conflict, profit expectations in US and A-share markets have been revised upward by 4% and 1.5%, respectively. The downward revision of profits for Hong Kong stocks is mostly due to their own industry-related drag in terms of structure, rather than because of geopolitical developments and high oil prices—in other words, the pricing of oil-price shocks on earnings has not yet been reflected.

In addition, a report by Guosheng Securities uses similar wording, stating that persistently high oil prices are a “gray rhino” that has not yet been fully priced in.

Of course, the effects of high oil prices are not “indiscriminate.” Therefore, clarifying the opportunities and challenges corresponding to differences in impact may become an important entry point to re-examine or re-price the effects of high oil prices.

A report by CICC notes that the differences mainly show up in two dimensions: first, whether there are diversified energy sources and alternative solutions that can reduce the shock from high oil prices as much as possible; such as China’s multiple energy-source channels and the development of US domestic shale oil—by relying on energy substitution or lower exposure to oil and gas costs (or even benefiting as a direct exporter of energy), these have a natural immunity to high oil prices; second, cost absorption capacity and production resilience. Even if they are affected, due to energy security systems, economies of scale, and supply chain resilience, the extent of damage is lower than that of competitors. They can even benefit when other capacity is forced to clear, thereby expanding market share, such as in steel and aluminum. Therefore, if high oil prices become a reality that China will have to accept for a period of time going forward, we should think about which industries have comparative advantages in China and which industry directions can benefit.

Huatai Securities’ calculations consider both the numerator and the denominator. For global equities, the logic of tightening financial conditions in the denominator is similar: on the one hand, as the persistence of rising oil prices strengthens, inflation expectations may be raised, which could cause rate-cut expectations to swing back, leading to an increase in risk-free rates. Based on macro and strategy-team estimates, if oil is at 80 US dollars/barrel, the 10-year US Treasury yield rises by 7.5 bps, and the US dollar rises by 0.6%-2.2%; if oil is at 100 US dollars/barrel, the 10-year US Treasury yield rises by 24 bps, and the US dollar rises by 1.2%-3.5%. On the other hand, geopolitical conflicts worsen risk appetite, pushing up the equity risk premium and further compressing stock valuations. Taking the S&P 500 as an example, in the two scenarios, the valuation pullback central point is 5.6% and 10.8%, respectively, and the stress test for maximum drawdown is even higher. Generally speaking, in markets with higher valuations and higher leverage, the risk of valuation adjustment declines is greater, and emerging markets face relatively higher pressure. But on the numerator side, the sensitivity of different countries’ stock index earnings structures to rising oil prices differs.

A report by Guoxin Securities mentions the “reshaping of profits under high oil prices.” Inventory buffers provide time for profit reshaping in the midstream and downstream. Currently, in A-shares, downstream manufacturing generally holds more than 2 months of high raw material inventories. This inventory buffer masks the cost shock in the short term, allowing profits to be maintained on March statements. But as low-priced inventories are depleted, if oil prices remain stably above 100 US dollars, chain profits will accelerate toward segments with energy substitution capability and strong pricing-through ability. Referring to the energy storm after the Russia-Ukraine conflict in 2022, the impact of high oil prices on A-share industries shows significant stage-like characteristics. In the short term, profits collapse rapidly upstream; resource controllers and energy substitutes are absolute beneficiaries. The experience from 2022 shows that in the initial phase of the shock, coal, oil exploration, and oil service sectors not only saw margin expansion from spot price increases, but also achieved a “double” in both profits and stock prices through valuation reshaping. From a long-term perspective, the profit center of traditional energy-intensive industries is substantially weakened, while sectors such as the new energy vehicle chain, energy storage, and green power—represented by decarbonization—have made a transition from valuation bubbles to earnings reality by replacing fossil energy costs.

As for investing, the real risk often does not lie in the shocks that are already known, but in the variables that have not yet been fully priced in. Returning to the question raised at the beginning of this article: if high oil prices are not a short-term issue, perhaps we need to come up with contingencies before the worst-case scenario truly occurs, and discover new opportunities amid differentiated impacts.

Reference Reports

“What does the energy gap mean for global growth?”, Huatai Securities, April 2026

“Profit Reshaping under High Oil Prices” , Huatai Securities, March 2026

“Profit Reshaping under High Oil Prices”, Guoxin Securities, March 2026

“Persistently High Oil Prices, a Gray Rhino Not Yet Fully Priced”, March 2026

“Who Benefits More under High Oil Prices?”, CICC, April 2026

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