Gf Securities has analyzed the effects of escalating Middle East geopolitical tensions on the global macroeconomic landscape and major asset classes.
Key Point One: Short-term uncertainty in energy supply has increased. The Strait of Hormuz facilitates the daily transit of approximately 20 million barrels of crude oil, accounting for about 20% of global supply, with limited short-term alternatives via land pipelines. Late on March 2nd local time, Iran announced the closure of the Strait of Hormuz. Brent crude prices have risen from $72.9 per barrel on February 27th to $77.7 per barrel as of March 2nd. The duration of the Strait's closure will be a critical variable moving forward.
Key Point Two: Global shipping costs and risk premiums are rising. Intensifying conflict has heightened risks along the Red Sea route. The Suez Canal, a crucial global trade artery connecting the Red Sea and the Mediterranean, handles over 15% of global goods trade and more than 30% of container shipping volume. Amid Middle East tensions, global shipping companies have implemented emergency measures, with many suspending relevant routes. Historically, vessels forced to reroute via the Cape of Good Hope face significantly increased transit times, leading to a substantial decline in fleet turnover rates.
Key Point Three: The global aviation and tourism sectors are experiencing short-term structural impacts. Reports indicate that several Middle Eastern countries have closed airspace, suspended airport operations, and canceled numerous flights. The Middle East is a popular global tourism destination, and the aviation industry is concurrently affected by tourism market risk aversion and rising oil prices. Following the escalation of Middle East tensions, overseas aviation and tourism stocks have shown notable adjustments. In response to potential impacts on travel itineraries, Chinese airlines, online travel agencies, and travel companies have promptly activated emergency support mechanisms.
Key Point Four: Inflation risks in the US and European economies are rising, increasing uncertainty regarding their monetary policy paths. According to the FOMC meeting minutes released on February 18th, the threshold for interest rate cuts has been raised. Several committee members explicitly supported including two-way descriptions in the statement, a first since the onset of the current easing cycle. Middle East geopolitical risks, leading to rising crude oil prices and increased trade supply chain costs, are further amplifying US inflation uncertainty. Europe's economy exhibits relatively higher vulnerability, while Japan is heavily dependent on energy imports. For overseas risk assets, this creates multiple concerns: fears of re-inflation or stagflation, volatility in liquidity conditions, and decreased risk appetite due to global economic uncertainty.
Key Point Five: Global risk aversion is increasing, reigniting the safe-haven narrative for precious metals. However, due to concurrent inflation anxieties, US Treasuries' safe-haven function is less pronounced. The US dollar has appreciated against a backdrop of weakened expectations for rate cuts. Concerns over economic dependency on crude oil have also diminished the yen's safe-haven appeal. The year 2025 was characterized by a unilateral narrative of de-dollarization and a search for a new "pricing anchor" in the global monetary system. Gold and silver prices peaked in late January 2026, followed by a clear loosening of this narrative and sharp price adjustments. However, from late February, against the backdrop of rising Middle East geopolitical risks, precious metals have experienced another rally. The 10-year US Treasury yield has shown little change, remaining flat between March 2nd and February 25th, while the yen depreciated during the same period.
Key Point Six: Attention on the "global security deficit" is increasing. A previous report highlighted that, based on the late January Winter Davos Forum, five major themes were key concerns for nations: geo-economic confrontation risks, economic autonomy, trade diversification, critical resources and industries, and defense security. Against the backdrop of escalating Middle East geopolitical tensions, focus on the "global security deficit" is set to rise further.
Key Point Seven: Certain Chinese export sectors are facing short-term impacts, elevating the importance of expanding domestic demand and building a robust domestic market. Data shows that China's exports to Arab League countries primarily consist of mechanical and electrical products like machine tools, ships, and construction machinery. The Middle East is also a target market for Chinese auto exports, with reports highlighting its strategic characteristics of "high value and strong demand." By 2025, the UAE ranked among the top destinations for Chinese auto exports. However, this impact is considered a short-term disruption, and the globalization trend of Chinese products is unlikely to change.
Key Point Eight: The economic resilience of major economies will face an objective test. Among emerging markets, South Korea's market index has shown the most significant adjustment. This is due to South Korea's trade-dependent economy, the impact of a rebounding US dollar on emerging market liquidity, and the high concentration of its industrial chain in three sectors: automobiles, shipbuilding, and semiconductors. The semiconductor supply chain is influenced by global tech asset pricing, which is itself affected by the logic of "rising crude prices - increasing inflation expectations - converging liquidity expectations."
Key Point Nine: Increased external uncertainty highlights the resilience of Chinese domestic demand as a key factor. Assets tied to the "global narrative" have already seen their underlying logic weaken. While some new technology asset areas still hold high medium-term potential, they face insufficient short-term risk-reward ratios. Amid rising external uncertainty, as cautioned in an annual outlook, it is crucial to further avoid one-sided risk exposure and promote asset diversification. Concurrently, certain Chinese assets benefiting from the "domestic demand expansion" theme possess structural pricing advantages. Economic data since the start of the year, including the BCI and high-frequency indicators, suggest a good start for January-February. Extended holidays have boosted consumer activity, and reforms like "staggered paid leave" offer potential. The recovery in CPI and PPI is accelerating, "anti-involution" efforts continue, potentially improving profitability in price-sensitive industries. Policies aimed at stabilizing investment and ongoing adjustments in real estate policy may present pricing opportunities and short-term advantages for cyclical sectors.
The analysis concludes by noting risks including unexpected short-term changes in the external economic and financial environment, a worsening of Middle East geopolitical risks impacting Western economies, greater-than-expected volatility in commodity prices, and unforeseen disruptions to global trade and shipping, including pass-through effects from fluctuations in crude oil and non-ferrous metal prices.
