CITIC Construction Investment: US-Iran Situation Becomes a New Source of Volatility Short-term Game of Crude Oil and Gold

CITIC Securities Research Report states that, looking ahead to March, major asset classes showed signs of rebalancing in February. The previously lagging U.S. Treasuries and crude oil rebounded, gold and silver volatility recovered, and tech valuations in the U.S. stock market eased. If there are no major events, the market will mainly consolidate. The U.S.-Iran situation has become a new source of volatility. In the short term, crude oil (underpriced tail risk of U.S.-Iran conflict) and gold (which needs time to catalyze after geopolitical crises); additionally, it is recommended to focus on U.S. tech stocks, as valuation pressures have been greatly released and there is significant upside potential after geopolitical easing.

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CITIC Securities: Asset Allocation Outlook for March

Looking ahead to March, major asset classes showed signs of rebalancing in February. The previously lagging U.S. Treasuries and crude oil rebounded, gold and silver volatility recovered, and tech valuations in the U.S. stock market eased. Without major events, the market is expected to mainly consolidate. The U.S.-Iran situation has become a new source of volatility. In the short term, crude oil (underpriced tail risk of U.S.-Iran conflict) and gold (which needs time to catalyze after geopolitical crises); additionally, it is recommended to focus on U.S. tech stocks, as valuation pressures have been greatly released and there is significant upside potential after geopolitical easing.

1. February Asset Class Review: Rebalancing Amid Geopolitical Disruptions

Since the beginning of the year, the recovery trade has been moderately reversed. Safe-haven demand increased, leading to gains in U.S. Treasuries and precious metals. Crude oil also received some support, while risk assets like U.S. stocks and copper performed modestly.

Geopolitical risks became the main catalyst (U.S.-Iran conflict). Additionally, U.S. economic data underperformed expectations, IEEPA tariffs were ruled invalid, AI skepticism pressured tech sectors, and the bankruptcy of UK financial institutions reignited private credit concerns—all of which temporarily suppressed risk appetite.

2. Key Macro Narrative Clues

(1) U.S.-Iran Situation: Escalation in both sides’ statements challenged the short-term expectation of ending hostilities, causing oil prices to surge and Asian-Pacific stock markets to decline.

(2) IEEPA Tariffs Declared Invalid: Short-term impact on the economy is limited, but it demonstrates institutional constraints. The risk of extreme policies under Trump has decreased (similar to last April’s “Tariff Liberation Day” shock), benefiting assets like U.S. Treasuries and the dollar, which had previously suffered credibility issues.

(3) Economic Data: Mixed results, with the “cockroach theory” of banking risks reemerging. The recovery outlook has been dampened, but expectations for rate cuts are being restored.

(4) Ongoing AI Skepticism: From capital expenditure, software ecosystems, to employment impacts, the U.S. tech sector shows a combination of upward earnings revisions and forward valuation compression.

3. Asset Class Outlook for March: Consolidation After Volatility

4. Overall Trend:

Looking ahead to March, major asset classes showed signs of rebalancing in February. The lagging U.S. Treasuries and crude oil rebounded, gold and silver volatility recovered, and tech valuations in the U.S. stock market eased. Without major catalysts, the market is likely to consolidate.

However, the U.S.-Iran situation has become a new source of volatility. Currently, concerns over extreme scenarios have increased. The weekend may be a key observation window. If no clear easing signals emerge, volatility could further intensify. A cautious defensive strategy is recommended.

Key events to watch: ongoing U.S.-Iran conflict, Federal Reserve policy meetings, Trump’s visit to China, and China’s industrial demand (copper) post-Lunar New Year.

2. Opportunity Highlights:

Crude Oil: Market underprices tail risks of U.S.-Iran conflict; moderate speculation is possible.

Gold: Currently not much upside, but after geopolitical shocks, gold needs time to catalyze.

U.S. Tech Stocks: Focus on long-side opportunities; valuation pressures have been greatly released, with significant upside potential after geopolitical easing.

(Source: First Financial)