The US-Iran conflict suppresses global risk appetite, the blockade of the Strait of Hormuz constrains oil, and the key to foreign capital inflow into Hong Kong stocks lies in fundamentals --- 0203 Macro Highlights

The US-Iran conflict suppresses global risk appetite, the blockade of the Strait of Hormuz constrains oil, and the key to foreign capital inflow into Hong Kong stocks lies in fundamentals --- 0203 Macro Highlights

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  1. On February 28, the US and Israel launched a joint strike against Iran, after which Iran retaliated. Geopolitical tensions temporarily boosted commodity risk premiums and suppressed global risk appetite, resulting in lower US Treasury yields. There are significant internal disagreements within the Federal Reserve. Although the market expects three rate cuts throughout the year, the timing of the first rate cut has been postponed.
  2. Iran implemented a blockade of the Strait of Hormuz for the first time. The strait accounts for over 25% of global maritime oil trade. War risk insurance premiums skyrocketed, and energy transportation costs and supply risks surged. In the short term, oil prices spiked due to panic, but as Iran's oil exports rely on the strait, and the blockade could easily trigger joint intervention, a sustained sharp rise is unlikely.
  3. Recently, Hong Kong stocks have been weak, mainly influenced by three factors: China’s credit cycle is turning to a volatile slowdown, limiting the upward potential of indices; the AI narrative structure is not favored by the market; and hawkish nominations by the Federal Reserve have disturbed global liquidity expectations. Historical experience shows the core condition for sustained foreign capital inflows is fundamental improvement.

I. US-Iran Conflict Suppresses Global Risk Appetite

US-Iran Conflict Suppresses Global Risk Appetite (Guotai Haitong)

Guotai Haitong notes that on February 28, the US and Israel launched a joint strike against Iran, after which Iran retaliated. Geopolitical tensions temporarily boosted commodity risk premiums and suppressed global risk appetite, resulting in lower US Treasury yields. There are significant internal disagreements within the Federal Reserve. Although the market expects three rate cuts throughout the year, the timing of the first rate cut has been postponed.

  1. The US and Israel launched a joint strike against Iran on February 28. Iran subsequently responded with missile attacks and announced a blockade of the Strait of Hormuz.
    • On March 1, Iranian media reported that Supreme Leader Khamenei "died in the line of duty."
    • Trump announced that bombing would last for a week.
    • In the short term, risk premiums for gold and oil increased, driving commodity prices up.
  2. Internal divisions within the Federal Reserve remain significant.
    • Waller stated that despite the January employment report significantly exceeding expectations, policy decisions shouldn't rely on single-month data. If employment continues to improve, maintain a wait-and-see stance; if it weakens further, there is reason to cut rates.
    • Goolsbee reiterated that rate cuts are not warranted until inflation truly declines.
  3. The market maintains expectations for three rate cuts in 2024.
    • The timing of the first cut has been postponed, with only a 45.9% probability for a rate cut in June.
    • The job market is stable, with initial jobless claims at 190,000, but continuing claims are high, indicating a situation of "low hiring, low layoffs."
    • Mortgage applications have declined, but refinancing activity remains strong.

Global risk appetite was suppressed, risk assets corrected, and US Treasury yields fell.

II. Strait of Hormuz Blockade Restricts Oil

Strait of Hormuz Blockade Restricts Oil (Caitong)

Caitong notes that Iran implemented a blockade of the Strait of Hormuz for the first time. The strait accounts for over 25% of global maritime oil trade. War risk insurance premiums skyrocketed, and energy transportation costs and supply risks surged. In the short term, oil prices spiked due to panic, but as Iran's oil exports rely on the strait, and the blockade could easily trigger joint intervention, a sustained sharp rise is unlikely.

  1. The Hormuz Strait blockade has sharply raised global energy transport costs and supply risks.
    • On February 28, Iran implemented a physical blockade of the Strait of Hormuz for the first time.
    • The strait handles over 25% of global maritime oil trade; the blockade led to nearly halted shipping and surging regional vessel war risk insurance premiums.
  2. Global oil supply is constrained.
    • Although eight OPEC+ member states announced production increases from April on March 1, the blockade will limit capacity release.
    • The US Department of Energy stated it would not release strategic oil reserves. Shale oil production growth has slowed and faces a lag, making it difficult to offset supply gaps immediately.
    • Existing land pipelines can only offset a small portion of supply loss.
    • Sea routes detours will significantly increase unit transportation costs and intensify supply tension.
  3. Oil prices rise in the short term, but sustained surge is unlikely.
    • Short term: Geopolitical risk premiums drive panic-driven oil price spikes.
    • Long term: Constrained by inventory depletion, transport route adjustments, and demand contraction.

It is expected that oil prices will find it difficult to sustain a large unilateral rally, as Iran's oil exports heavily rely on the strait and the blockade is likely to trigger joint intervention by major consumer countries to restore navigation.

III. Foreign Capital Inflows to Hong Kong Stocks Depend on Fundamentals

Foreign Capital Inflows to Hong Kong Stocks Depend on Fundamentals (CICC)

CICC notes that recently Hong Kong stocks have performed weakly, mainly due to three factors: China's credit cycle is shifting to a volatile slowdown, which limits index upside, the AI narrative structure is not favored by the market, and hawkish nominations by the Federal Reserve are disturbing global liquidity expectations. Historical experience shows the core condition for sustained foreign capital inflows is improvement in fundamentals.

  1. Recent weakness in Hong Kong stocks is mainly due to credit cycle shifts, industry narrative differentiation, and liquidity headwinds.
    • In 2026, China's credit cycle may transition from recovery to a volatile slowdown, limiting overall upward space for indices.
    • The internal AI narrative structure in Hang Seng Tech is not favored by the current market.
    • Hawkish Federal Reserve nominations are disturbing global liquidity expectations.
  2. Conditions for foreign capital inflows are fundamental improvement; rate cuts or RMB appreciation are only auxiliary factors.
    • Historically, there have been two major influxes.
      • From May 2017 to May 2018, supply-side reforms and MSCI inclusion of A-shares.
      • From November 2020 to February 2022, China led the post-pandemic recovery and the emergence of the new energy industry.
    • Currently, active funds in Europe and the US are under-allocated to China. If they revert to normal allocation, inflows of HKD 500-550 billion are expected.
    • Recently, since early 2026, active foreign capital has flowed into China for seven consecutive weeks.

Risk Warning and DisclaimerThe market has risks, and investment needs caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article fit their particular situation. Investments made accordingly are at your own risk. ```