Industrial Securities: Middle East Risks Have Substantially Materialized; Focus on U.S. Bonds, Precious Metals, and Forex Markets

Financial Express APP has learned that Industrial Securities issued a statement stating that after the Venezuela incident earlier this year, on February 28, the US and Israel jointly took military action against Iran in the Middle East, marking the realization of the second “Black Swan” event—the Middle East risk has substantially materialized. On February 28, Wang Han from Industrial Securities mentioned during a conference call Q&A regarding the US-Israel-Iran conflict that the previous view of a “bull market with rapid declines” remains unchanged, and recommended focusing on US bonds, precious metals, and foreign exchange markets: when gold prices accelerate upward, while the US dollar and US bond prices turn from rising to falling, and the RMB exchange rate begins to appreciate, it indicates that the market believes Iran can withstand the first wave of US and Israel attacks.

The conference call content is as follows:

Q1: What is the essence of this US-Iran conflict? Why did the US choose this timing to act?

A: The essence of this conflict is a strategic gamble by the US to reverse its strategic dilemmas in supply chains, industry, tariffs, and other areas. The US chose to act now mainly based on three factors: First, Israel’s proactive push, attempting to leverage the US to resolve Iran issues; second, the US and Israel’s intelligence network in Iran may have been damaged during recent unrest, prompting Trump to intervene directly; third, Trump faces domestic political pressure and urgently needs a quick victory to boost approval ratings and reverse unfavorable midterm election trends.

Q2: What are the strategic goals of the US, Israel, and Iran respectively?

A: Israel’s core goal is to overthrow the current Iranian regime and completely eliminate Iran’s threat to its security. Trump’s goal is more complex: not only to overthrow the Iranian regime but also to achieve a quick and decisive regime change victory to stabilize domestic political support, deter strategic allies, and slow down the decline of US global hegemony. Iran’s bottom line is regime survival. As long as the current regime is not overthrown, if Iran can drag the US into a prolonged conflict in the Middle East, its geopolitical value will further increase, and it may gain more support from other major powers.

Q3: If the current Iranian regime is overthrown, what chain reactions might occur in geopolitics?

A: First, a reshaping of the Middle East landscape, with Sunni forces forced to compromise with Israel and the US, and Turkey’s diplomatic stance possibly becoming more pro-Western; second, the South Asian region will be impacted, with key Belt and Road nodes cut off, and Pakistan facing a dilemma of fighting on two fronts; third, the pattern of major power rivalry will change, with increased geopolitical pressure on southern Russia, the US opening access to Central Asia, and a gradual formation of global resource alliance structures.

Q4: What regional chain reaction risks might this conflict trigger?

A: Focus on three main areas: First, a short-term escalation on the Russia-Ukraine battlefield, with Ukraine possibly increasing offensives to contain Russia; second, a significant rise in strategic risks for India in South Asia, potentially threatening Pakistan; third, accelerated risks of Japan’s militarization in East Asia, with the US possibly further easing restrictions on Japan.

Q5: How will this conflict impact the A-share market?

A: Maintain the previous view of a “bull market with rapid declines”:

1. In the short term, the market will face shocks due to three reasons: first, insufficient recognition of Iran’s importance in Eurasian geopolitics; second, rising concerns over the US building a global resource monopoly alliance; third, resource price increases may impact manufacturing sectors.

2. The medium-term bull market foundation remains unchanged. First, China has the world’s largest industrial system, which is its core strategic advantage; second, if Iran successfully withstands the first US-Israel attack, market perceptions of great power competition will undergo a systemic reversal, with significant changes in US bonds, the dollar, gold, and other assets; third, according to the 300-year historical pattern since the Industrial Revolution, the world’s largest industrial nation has always been the most stable in geopolitical competition.

Q6: Besides, what key signals should financial markets observe?

A: Focus on US bonds, precious metals, and foreign exchange markets: when gold prices accelerate upward, while the US dollar and US bond prices turn from rising to falling, and the RMB begins to appreciate, it indicates the market believes Iran can withstand the first wave of US-Israel attacks.

Q7: From a strategic perspective, what is the long-term impact of this conflict on the US?

A: This is a tactical gamble by the US. If successful, the US will gain enormous returns, significantly delaying its decline in global hegemony; but if Iran withstands the first wave, the US may face serious consequences of “losing the principal,” falling into a quagmire of prolonged conflict in the Middle East, with its strategic position further weakened. However, regardless, the previous global hegemon has relied on such tactical risks to address internal and external issues, indicating that the major upheaval process has already reached the “midgame” stage.

Risk Reminder: Uncertainty in domestic and international economic policies, geopolitical risks, and global economic and financial risks.