The outbreak of the U.S.-Israel-Iran war has worsened the global security situation.With oil supplies constrained and prices skyrocketing, this crisis has become a test for the economic structures and national security of countries worldwide. Who is vulnerable or resilient has turned out to be the exact opposite of what most people previously believed.

When missiles struck airports and hotels in the United Arab Emirates, global capital markets were jolted into realization: a nation’s prosperity and security are, in fact, incredibly fragile. The collapse of Dubai’s real estate market casted a shadow over smaller nations lacking the capacity to defend themselves. Once war arrives, without independent security guarantees, everything is fleeting.

In the face of war, stock and bond market performance directly reflects which nations are vulnerable and which are resilient. Although Japan and South Korea both possess strategic oil reserves of over 200 days, their stock markets still plummeted. In India, 70% of fertilizer plants were forced to shut down due to natural gas supply disruptions, and street vendors could not set up shop without liquefied natural gas. Countries such as Laos, Singapore, Malaysia, the Philippines, and Myanmar are facing gasoline shortages. Europe faces the triple pressure of high oil prices, high inflation, and energy shortages. Stock markets in Europe, Japan, and India fell by about 10% in March, while South Korea experienced multiple circuit breakers and a decline of nearly 20%. Stock markets in the U.S., Russia, and China fell by about 5%, remaining relatively stable. Bond markets in Europe and the U.S. both faced selling pressure, with 10-year government bond yields rising by 50 basis points. China’s stock market has performed very steadily this time, and the government bond market has also remained stable — an impressive achievement. The United States and Russia are net oil exporters and benefit from rising oil prices, while China, however, is an oil importer with a high degree of dependence on imported oil. A stark contrast can be seen when comparing China’s performance to that of Japan and South Korea, which also rely heavily on imported oil. Given the surge in oil prices, the steady performance of China’s stock and bond markets has exceeded most people’s expectations.

Major Stock Indices Performance in March 2026: (During the US-Israel-Iran War)

US	Japan	Korea	India	Russia	EU	China
-5.09%	-13.23%	-19.08%	-11.52%	-5.67%	-9.26%	-5.53%

Behind China’s resilient performance, there has been decades of industrial planning and strategic position. Coal-fired power generation accounts for 60% of China’s total electricity generation, while renewable energy accounts for 35%. China is also the world’s largest player in the coal chemical industry. Core sectors such as coal-to-olefins, coal-to-oil, coal-to-natural gas, and coal-to-ethylene glycol collectively account for approximately 62% of the global market. This has significantly reduced China’s reliance on oil. China accounts for 70% of global electric vehicle sales, 90% of photovoltaic modules, 70% of wind power equipment, and 85% of energy storage batteries. Should another oil crisis erupt, the importance of China’s new energy industry would even grow. As the world’s largest nation in manufacturing, China is also the only permanent member of the UN Security Council that has not participated directly or indirectly in the war. The United States held this unique strategic position in the 1930s before World War II, and now it is China’s turn. War disrupts supply chains, and excess production capacity becomes a strategic resource during wartime. If the global security situation continues to deteriorate, the importance of China’s manufacturing sector will become even more evident.

Many investors who are concerned that the escalation of the U.S.-Israel-Iran conflict will drive oil prices higher, dragging down the performance of A-shares, are exiting the stock market in panic. We categorize factors affecting the stock market into unpredictable randomness and predictable patterns. It is impossible to predict when Trump will bomb Iran, nor when tensions will de-escalate. If these events were predictable, one could simply go long or short on oil to get rich. Although these unpredictable random events have a significant impact on short-term trends, we should not base investment decisions on them, as no one can say for certain.

For long-term investing, these unpredictable random events are nothing but noise. However, some investors are easily distracted by this noise and overlook predictable patterns. Instead, we filter out this noise and focus on predictable patterns in our investment approach. It is these consistently repeatable investment patterns that are the keys to accumulating long-term returns.

The U.S.-Israel-Iran conflict does not change our view that the current A-share bull market will reach new historical highs. 

The low-interest-rate environment highlights the value of the stock market. With the “Housing for Living, Not for Speculation” policy leaving substantial capital without investment outlets. The wealth effect of the stock market will drive consumption and investment. Listed companies’ revenue and profits are returning to positive growth, and the balance of power in U.S.-China competition is shifting. These five long-term changes have not yet been fully reflected in the stock market, and the valuation gap between Chinese and U.S. markets remains significant. In the coming years, as the stock market gradually adjusts to these changes, it will drive the stock market higher, setting new historical highs and replacing the real estate market as the primary driver of the wealth effect.

In terms of style selection, after considering factors such as the bull market environment, valuations, and market crowdedness, we are more optimistic about large blue-chips and small-caps — the two extremes of the market spectrum—while selectively participating in growth stocks. 

Large blue-chips are significantly undervalued and serve as the foundational force for this slow bull market. As listed companies’ revenue and profits resume growth, this will drive stock prices higher. Small-caps have seen substantial gains over the past year. But thanks to the rotation effect, the overall valuation increases have not been excessive, remaining at the medium of the past five years. Moreover, market crowdedness is not high. Growth stocks have seen significant valuation increases, showing some crowdedness, so it is necessary to be more selective given the bull market environment.