The geopolitical "powder keg" in the Middle East has been ignited once again. On February 28th local time, the United States and Israel launched attacks on multiple targets within Iran, marking a renewed outbreak of conflict between Israel and Iran.
The news immediately sent shockwaves through global capital markets. As the "heart" of the global energy landscape, the rekindling of conflict in the Middle East quickly triggered a surge in the prices of energy assets like oil and natural gas. ICE Brent crude posted a single-day gain of over 3% last Friday. Concurrently, a sharp rise in market risk aversion drove strong inflows into precious metals, with spot gold in the grey market briefly surpassing $5,570 per ounce.
"Spent the entire weekend on various conference calls," a senior fund manager in Shanghai described his hectic schedule. "Starting from Friday afternoon as tensions escalated, there was a constant stream of analyst briefings, discussions with peers, and inquiries from clients. How high can Brent go? Is it still time to chase gold? Will risk assets be impacted? We all needed to form a baseline view to navigate Monday's market." Several fund companies believe this conflict not only exacerbates the fragility of global energy supply but also introduces significant uncertainty into the trajectory of commodities and risk assets for the year.
Geopolitical conflict amplifies the volatility of the oil and gas sector. In fact, even before this conflict erupted, market concerns about geopolitical risks had been brewing, with underlying momentum building in the oil and gas sector.
Since the start of the year, driven by a confluence of factors including tight supply-demand balance, escalating geopolitical conflicts, and long-term underinvestment in capital expenditure, the oil and gas sector has continued its strong performance. ICE Brent crude prices have climbed steadily from $58.72 per barrel at the end of last year, recently breaking through the $73 per barrel mark, representing a year-to-date increase of over 20%. Bolstered by this, the Dow Jones U.S. Oil & Gas Exploration & Production Index has risen 18.43% year-to-date, while the CSI Oil & Gas Resources Index has surged 33.07%. Stocks like Tongyuan Petroleum and Potential恒信 have seen their prices double.
Regarding the strong performance of the oil and gas sector, Guotai Fund views geopolitics as a key catalyst for rising oil prices. Tensions in the Middle East and increased shipping risks in the Strait of Hormuz have led markets to continuously price in a geopolitical risk premium, further pushing up expectations for oil price increases and making crude oil the commodity with the most significant upward potential currently.
However, the aforementioned senior Shanghai fund manager holds a different view. He believes that crude oil's strong performance since the precious metals liquidity shock in February already implied expectations of conflict. Considering that Trump's MAGA agenda primarily focuses domestically, the probability of prolonged U.S. involvement in the conflict is limited. If the conflict remains contained, referencing the 2025 scenario, crude oil might experience a short-term spike to $80 per barrel before its upward momentum gradually fades.
"Another transmission channel is shipping, particularly for oil products," a fund manager heavily invested in resource assets stated. "The Strait of Hormuz, controlled by Iran, is the world's most critical oil shipping chokepoint. Any military action could lead to blocked routes or a sharp rise in shipping insurance premiums, which would directly benefit the oil tanker sector. Spot freight rates for relevant shipping companies could see a short-term spike. However, simultaneously, industries highly dependent on crude oil costs, such as aviation and chemicals, will face immense pressure, potentially creating a 'split market' scenario."
Data from the Baltic Exchange shows that the freight rate index for Very Large Crude Carriers (VLCCs) on the key TD3C route from the Middle East to China rose nearly 26 points recently to WS 163.28. The equivalent time charter rate for this route reached $151,200 per day, a 172% increase from $55,500 per day in early January, indicating a clear shift towards a "short-squeeze" type upward movement in market sentiment.
Taking a longer-term perspective, Guotai Fund believes the oil and gas sector offers both short-term trading opportunities and medium-term allocation value. In the short term, uncertainties from geopolitical conflict, the continuity of OPEC+ production cuts, and fluctuations in crude oil inventories will continue to serve as catalysts, providing ample volatility for sector stock prices. From a medium-term viewpoint, with the center of oil prices steadily rising, the profit stability and cash flow adequacy of domestic Chinese national oil companies continue to improve. Coupled with the advantage of high dividends, the sector possesses strong allocation appeal during a period of declining interest rates. Long-term, the energy transition is a gradual process; traditional energy remains the core support of the global energy system, with oil and gas demand having a solid long-term floor. The industry will not decline rapidly. Leading companies, leveraging their resource advantages, cost advantages, and global layouts, can continue to generate stable returns, making them suitable as part of a long-term asset allocation strategy.
Gold's safe-haven appeal heats up again. Besides crude oil, the safe-haven asset gold is also gradually resuming its upward trend after significant volatility. Following the severe Middle East situation last Friday (February 27th), COMEX gold rose nearly 2%, approaching the $5,300 per ounce level.
Huaan Fund attributes this to two factors: firstly, the continuation of Middle East tensions and a significant rise in geopolitical risk prompting safe-haven flows into gold; secondly, the recent U.S. ruling that its previously imposed "reciprocal tariffs" were illegal. The invalidation of these tariffs will reduce U.S. government revenue sources, exacerbating concerns about the U.S. government's debt burden, while simultaneously alleviating domestic inflation pressures in the U.S., potentially opening the door for Federal Reserve rate cuts. Both factors are seen as positive for gold.
"This escalation of geopolitical conflict is the direct trigger for the short-term rise in gold prices," the aforementioned resource-focused fund manager commented. "The sharp increase in geopolitical risk has validated gold's role as a traditional safe-haven asset, attracting substantial capital seeking a safety net. However, we believe this gold rally cannot be simply attributed to safe-haven demand alone."
He further analyzed that the more core driving force lies in how extreme events like war amplify market concerns about long-term structural issues. "For instance, behind the multi-year gold-buying spree by global central banks is the grand narrative of 'de-dollarization' and reserve asset diversification. Another example is the issue of high U.S. fiscal deficits and the debt ceiling, which essentially represents a draw on the long-term credibility of sovereign fiat currencies. Geopolitical conflict acts as a reminder, prompting investors to re-examine gold's unique value in hedging against macroeconomic uncertainty and credit risk. Therefore, even if short-term conflicts ease, these long-term logics will continue to support gold's strategic allocation value."
From a medium to long-term perspective, Huaan Fund believes the macro-structural factors supporting gold have not fundamentally reversed. These include sustained gold purchasing demand from global central banks amid de-dollarization, the pressure on the long-term credibility of the U.S. dollar from U.S. "fiscal dominance" policies, and systemic risks arising from the fragmentation of the global geopolitical landscape. Gold's value in hedging against "international order collapse risk" and "sovereign fiat currency risk" is becoming increasingly prominent.
"Looking ahead, after a period of volatile adjustment, gold prices are showing signs of stabilization, with volatility also significantly receding, making its allocation value gradually apparent. We recommend participating in gold investment with a steady, broad asset allocation philosophy," Huaan Fund stated.
Remaining vigilant about inflation risks and industry pressure. Behind the rally in resource prices, the negative impacts stemming from geopolitical conflict are also triggering deeper market concerns.
Yang Delong, Chief Economist at Qianhai Kaiyuan Fund, stated that Iran is a major global oil producer. Attacks on it could lead to an imbalance between supply and demand in the international crude oil market, potentially causing international oil prices to surge significantly. Rising oil prices would directly increase production costs for industries using oil as a raw material, such as chemicals. Simultaneously, industries with high oil consumption would see their profit margins compressed due to rising costs. The international aviation industry would also be significantly affected. Currently, Israel has closed its airspace, and Iran might follow suit, which would further impact international aviation.
Compared to the direct impact on specific industries, some market participants are more concerned about the macro chain reaction caused by rising oil prices.
"The impact of geopolitical conflict on oil prices is direct, but investors need to be more wary of its secondary effect: the resurgence of inflation," another public fund manager in Shanghai cautioned more prudently. "Energy is the mother of inflation. Sustained high oil prices will directly push up the global inflation baseline. This could disrupt the interest rate cut plans of major central banks like the Fed. Once rate cut expectations are broken or delayed, it could significantly suppress the valuation of global risk assets."
A Fund of Funds (FOF) manager also analyzed from an asset allocation perspective: "For 2026, close attention needs to be paid to the upside risks in global energy prices. If energy prices experience sustained, substantial increases, the impact of global re-inflation on overseas interest rates could trigger new changes in global asset pricing. Based on our assessment of the current and the 2026 economic and market environment, we have gradually increased allocations to domestic demand and leading cyclical stocks to enhance the balance of our portfolio."