Xingzheng Securities Wang Han: Seven Judgments on the First Phase of US-Iran Conflict

This article is based on Dr. Wang Han’s conference call on March 16.

In the February 28 conference call, we mentioned that attacking Iran is a high-stakes gamble for the United States and Trump—if Iran withstands the first wave of strikes, the U.S. and Trump himself may face a more passive strategic situation. From recent Middle East developments, it may be time to summarize the previous situation:

1. The first strategic goal of Israel and the U.S. can no longer be achieved

Strategically, since the outbreak of the conflict, the Iranian regime has not only withstood the initial attacks but also solidified its hardline position after leadership changes. The U.S. and Israel’s attempt to quickly overthrow the Iranian government has failed. Although tactically they still hold advantages, both sides are gradually entering a stalemate of “strong but not victorious, weak but hard to collapse.” As the invaded party, Iran only needs to stabilize its regime to gradually open up the situation, so time is on Iran’s side.

2. In the short term, U.S. and Israeli strikes on Iran may intensify

For Trump, forcing war against the wishes of MAGA and the Silicon Valley right has already incurred significant political costs. If TACO causes serious political repercussions, further military escalation is highly likely. From the perspective of both Democratic and Republican parties, although there were disagreements before the war, a hasty U.S. withdrawal now would severely impact America’s global influence, which is not in anyone’s interest. Additionally, Democrats hope to use the stalemate to further weaken Republican support, so there is currently a domestic consensus to increase strikes on Iran—evidence being that Congress has not substantively opposed Trump’s military actions so far. In the short term, the U.S. and Israel are likely to escalate air strikes against Iran. Subsequently, U.S. forces may gradually “add fuel” by increasing ground forces. Given Iran’s population, territory, and military strength far surpass Ukraine and Vietnam in the past, the probability of the U.S. revisiting the “escalation” tactics of the Vietnam War—starting with limited forces, gradually increasing, and ultimately falling into a prolonged attrition—is rising.

3. The blockade of the Strait of Hormuz has two modes, with U.S.-Iran focus on gaining third-party support

Iran’s preferred mode is to lead the passage rules of the strait and use this to weaken U.S. influence in the Middle East. The U.S. and Israel, if unable to completely eliminate Iran’s interference in strait traffic, may resort to “false flag” operations to attack foreign ships and undermine Iran’s relations with other countries.

Essentially, both the U.S. and Iran do not aim for simple blockade but seek to influence third-party countries’ positions—Iran hopes to set “rules” in the Middle East to signal the decline of U.S. influence, while the U.S. and Israel emphasize Iran’s threat to maritime shipping to further isolate Iran.

So far, most countries have not clearly taken sides. China has urged a ceasefire and supported Iran’s stability, emphasizing the need to prevent spillover of the conflict; Europe’s stance depends on its assessment of U.S. chances of victory; Arab countries’ primary concern is avoiding becoming frontlines in U.S.-Iran confrontation—if Israel and the U.S. keep winning, they may lean West, but if U.S. shows fatigue, they prefer to see Iran eliminate U.S. military presence on their soil.

4. Oil prices are likely to remain high, with attention to the differences between the two modes

As mentioned, both Iran and the U.S. have motives to push for a strait blockade. Short-term energy supply tensions are unlikely to ease quickly, and oil prices may not significantly fall in the near term. The key question is whether Iran, leveraging its geographic advantage, will achieve a “structural” blockade under its dominance, or whether the U.S. and Israel will “muddy the waters” for a comprehensive blockade.

These scenarios will differently impact global oil prices. The former may lead to divergence between WTI, Brent, and Shanghai crude oil prices, with Shanghai prices rising more moderately or even creating demand for RMB-based oil trading. The latter could cause a global surge in oil prices.

5. The risk of spillover is rising; focus on four major directions

First, South Asia—India and Pakistan heavily depend on Middle Eastern energy, and Pakistan is a key transit route for Iran and major Eastern powers. If the U.S. gets bogged down in Iran, India’s strategic risks against Pakistan could increase significantly. Second, Eastern Europe—aiming to contain Russia, the intensity of Russia-Ukraine conflict may escalate, and NATO pressures in Eastern Europe (e.g., Serbia) could rise. Third, East Asia—disrupted Middle Eastern energy supplies could heighten political pressure in Japan, and the U.S. may seek Japan’s support in East Asia. Recent visits by Sanae Takaichi to the U.S. warrant attention for potential negative developments. Fourth, U.S.-China rivalry—if the Middle East stalemate persists, Trump might “manufacture issues,” and in trade and geopolitical fields, “empty threats” could increase uncertainties in U.S.-China relations.

6. For the A-share market, strategic outlook is not to be overly bearish; tactically, contrarian operations are possible

Strategically, the current U.S. predicament in the Middle East confirms the decline of U.S. hegemony and boosts confidence in winning major power competition. Additionally, recent government measures to stabilize and improve the domestic capital markets provide a solid foundation for resilience in the A-share market. Therefore, it’s inappropriate to adopt a pessimistic view of the A-shares.

Tactically, contrarian operations can be considered. Markets inherently dislike risk; considering the possibility of increased U.S. strikes on Iran (such as intensified bombings or ground deployments), risk aversion may rise further. Iran’s tactical position is weak, and its strategic advantage takes time to materialize, leading short-term funds to avoid risk. When market sentiment is overly pessimistic, going long may be appropriate; when overly optimistic, reducing positions is prudent. This counter-cyclical approach may better address short-term volatility.

7. Three future observation points

First, the trend of the U.S. dollar and gold—discussed in our February 28 call. If gold strengthens and the dollar weakens, it indicates the market increasingly views U.S. strategy as failed, which benefits RMB assets. Second, the midterm election process—prolonged conflict may impact Republican support, increasing intra-party calls for ceasefire before the elections, while Democrats may oppose this; if the conflict extends beyond midterms, the political landscape could shift again, affecting U.S. electoral outcomes. Third, risks related to Trump’s personal safety and internal U.S. conflicts—if the mainstream view is “no chance of victory” against Iran, the narrative that Trump is the “culprit of U.S. quagmire” could solidify, significantly raising his personal and political risks, and possibly prompting him to take more radical actions.

Source: Wang Han on Macroeconomics

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