Since February 28, the escalation of the military conflict between the United States, Israel and Iran has triggered unexpected changes in the geopolitical situation in the Middle East. The global crude oil market has experienced violent fluctuations. The A-share oil and gas sector and related funds have surged in response, and many oil and gas ETFs and LOF funds have achieved 10% daily limit. However, market sentiment quickly switched. On March 4, the oil and gas sector experienced a collective correction, and the previously hot oil and gas funds simultaneously weakened. In the face of a huge market shock, exchanges and fund companies have successively tried to cool down the market by suspending trading, warning of premium risks, and restricting large-amount subscriptions. Analysts from several fund companies pointed out that supply concerns caused by the obstruction of transportation in the Strait of Hormuz are the core driving force of this market. However, short-term risk premiums have accumulated rapidly, and investors need to be wary of callback pressures caused by repeated geopolitical situations and reversals in market sentiment.
The escalation of geopolitical risks has caused shocks in the oil market, and oil and gas funds have started to rise and limit their prices.
The core of this change in the oil and gas market is the continued escalation of geopolitical conflicts in the Middle East. On February 28, Israel and the United States launched a joint military operation against Iran, and Iran immediately launched a counterattack. On March 1, the news that Iran's Supreme Leader Ayatollah Ali Khamenei was killed in an air strike further intensified the market's concerns about the expansion of the conflict. As the core channel of global crude oil trade, the Strait of Hormuz is responsible for 20% of the world's crude oil transportation tasks. Due to the conflict, the Strait was almost completely closed. Dozens of oil tankers took refuge in the Persian Gulf. More than half of the world's marine insurance institutions also canceled war risk coverage in the region. The expectation of crude oil supply interruption directly pushed up international oil prices, and the Brent and WTI crude oil futures curves strengthened simultaneously.
Market sentiment switches rapidly, regulatory authorities and fund companies cool down urgently
Multi-dimensional interpretation of institutions: short-term events dominate, medium and long-term supply and demand provide support
As for the core driving factors of this round of oil and gas prices, institutions generally believe that supply-side shocks caused by geopolitical conflicts are the main cause. Ren Fei, deputy director of the Equity Research Department of China-Europe Fund, pointed out that in the short term, the uncertain geopolitical situation and the risk of denial of claims in shipping insurance will jointly support the high prices of benchmarks such as Brent crude oil. JPM estimates that the current price of Brent oil only implies a risk premium of US$10. If global oil shipments continue to be disrupted, oil prices may rise further.
Boshi Fund Manager Wang Xiangze said that the US-Israeli military action against Iran has escalated from the previous "shadow conflict" to an open military strike. The "substantial closure" of the Strait of Hormuz and the detour decision of marine insurance and shipping companies are pushing the geo-premium from the financial level to the physical level. Under the current crude oil supply and demand and inventory conditions, oil prices are expected to remain high under the baseline scenario. Among them, oilfield equipment, offshore engineering orders and prosperity have event-driven elasticity, and domestic related targets are expected to benefit.
Li Muyang, manager of Huatai-PineBridge Fund, analyzed that against the background of overall pressure on risk assets, the energy sector has received concentrated allocation of funds due to its dual attributes of "quasi-risk aversion + inflation hedging". On the one hand, rising oil prices directly increase the profit elasticity and cash flow expectations of upstream exploration and development companies (E&P), and the market has upward revisions to their free cash flow for 2024-2025; on the other hand, if oil prices remain high, expectations of sticky global inflation may be strengthened, and the relative valuation attractiveness of energy assets is expected to increase. Judging from the market structure, oil services, oil transportation and upstream resource stocks performed better.
In terms of judging the sustainability of the market, institutions generally believe that the short-term oil and gas market is still dominated by geopolitical events, while the mid- to long-term trend depends on the subsequent evolution of crude oil supply and demand fundamentals and the geopolitical situation. Cathay Fund pointed out that the market is currently only pricing local wars with "limited scope and short-term supply losses". If Iran leads the war to a protracted war, shipping in the Strait of Hormuz is suspended for too long, and overlapping inventories are depleted, short-term risks will escalate to structural tensions, and oil prices will gain further upward momentum. Goldman Sachs estimates that the oil price risk premium is about US$18/barrel. Many overseas investment banks also pointed out that if the blockade of the Strait of Hormuz continues for several weeks, oil prices may point to US$100/barrel or even higher.
Li Muyang also gave a risk warning. A certain risk premium has been included in the current international oil prices. If the conflict does not substantially affect production or transportation, prices may retreat in stages. In the short term, the oil and gas sector is still driven by events; in the medium and long term, factors such as the tight balance between supply and demand, the resilience of downstream demand, and the strengthening of energy security strategies may also provide certain support for the value of medium and long-term allocations.
Tian Yue, a senior strategist at China Merchants Fund, said that from a global market perspective, energy and commodities are expected to avoid risks first and then ease, while long-term risks still exist. The scale and duration of this conflict are likely to exceed that of the previous round, and the corresponding market uncertainty window may also be lengthened accordingly. The long-term trend of oil prices will still depend on factors such as supply and demand fundamentals, various countries' oil production capacity and production potential.
Abandon short-term speculation, institutions explain in detail the allocation logic of the oil and gas market
Facing the violently volatile oil and gas market, whether ordinary investors are still suitable to enter the oil and gas ETF has become the most concerned issue in the current market. In this regard, fund institutions generally recommend that investors treat it rationally, abandon the thinking of short-term speculation, and distinguish the different logics of short-term games and medium- and long-term allocations.
Boshi Fund Manager Wang Xiang made it clear that the direction of macroeconomic events is difficult to predict, and recurrences are common. High volatility in the oil and gas sector may also lead to fast-paced retracements and re-pricing. It is recommended that investors still treat it with an allocation approach and avoid over-trading short-term emotions. Ren Fei, deputy director of the Equity Research Department of China Europe Fund, said that in a market environment with significantly intensified short-term uncertainty, it is recommended that investors pay more attention to oil and gas resources and cost-advantage coal chemical assets.
For investors who prefer mid- to long-term allocation, institutions recommend adopting a bargain-hunting strategy. Ren Fei suggests focusing on investment opportunities in the oil and gas mining and refining sectors, while seizing the cost advantage opportunities in the coal chemical industry chain. Based on my country's resource endowment of rich coal and poor oil, domestic coal chemical companies The industry has a natural cost moat on the raw material side. Coupled with the recent overall low thermal coal price affected by the warm winter, the cost advantages of coal-to-olefins, coal-to-methanol and other subdivisions will be further amplified. The profit scissor gap will continue to widen, and the ROE of related leading companies is expected to usher in a substantial recovery.
China Merchants Fund gave a broader allocation idea. Tian Yue said that from the domestic market, the slow bull pattern of A-shares is still there, and the RMB has been in a moderate appreciation channel since the beginning of 2025. Against the backdrop of weak growth in the U.S. stock technology sector this year, the growth of China’s equity assets The attractiveness may be further enhanced. In terms of allocation structure, equity assets should maintain active positions and deploy high-quality assets. In addition to energy sectors such as oil and gas, they can also focus on and deploy products with cyclical price increase logic such as chemicals and non-ferrous metals, as well as energy, dividends and other assets with undervalued quality logic.
