The situation in the Middle East has fluctuated again! Next week, the A-shares await a clearer direction

This week, global capital markets faced pressure under the dual impact of escalating geopolitical conflicts and rising inflation expectations. All three major U.S. stock indices closed lower, with the Nasdaq index down 3.23% for the week, the S&P 500 index down 2.12%, and the Dow Jones Industrial Average down 0.90%, marking a five-week consecutive decline for all three indices. European markets showed mixed performance, with the French CAC40 index up 0.47%, the UK FTSE 100 index up 0.49%, and the German DAX index down 0.36%. In the Asian markets, the Nikkei 225 index was basically flat, the Hang Seng Index fell 1.29% for the week, and the Hang Seng Tech Index fell 1.94%. The A-share Shanghai Composite Index fell 1.10% for the week, the Shenzhen Component Index fell 0.76%, the ChiNext Index fell 1.68%, and the CSI 300 Index fell 1.41%. This week, the situation in the Middle East evolved repeatedly, becoming a core variable influencing global market sentiment. At the beginning of the week, geopolitical conflicts oscillated between hardline statements and tentative contacts, causing market risk appetite to fluctuate. In the latter half of the week, the situation suddenly escalated. On March 27, local time, Israel and the United States attacked Iran's Fordow nuclear facility. On March 28, an Israeli airstrike killed the commander of the Iranian Islamic Revolutionary Guard Corps Navy, Rear Admiral Alireza Tangsiri, and the U.S. subsequently deployed a second aircraft carrier strike group to the Middle East. Meanwhile, shipping in the Strait of Hormuz continued to be obstructed, with the UN Secretary-General announcing the establishment of a special working group, and the total loss of crude oil supply to date approaching 500 million barrels. As a result, international oil prices surged significantly. As of the close on March 27, WTI crude oil futures settled at $101.18 per barrel, and Brent crude oil futures settled at $112.38 per barrel. The spike in energy prices pushed inflation expectations higher, with the U.S. consumer confidence index falling to a three-month low in March, and expectations for fuel prices over the next year soaring about five times compared to February. Market expectations for major central banks to cut interest rates this year further cooled, and tightening trading sentiment continued to spread. The A-share market experienced a decline followed by a rebound this week, with the Shanghai Composite Index finding support in the 3850-point range and rebounding to close at 3913.72 points on Friday. Small-cap stocks performed actively, with the Sci-Tech 200 and the CSI 2000 indices rising 0.88% and 0.35% respectively, indicating a market style shift towards small-cap stocks. Trading volume fell below 2 trillion yuan for two consecutive trading days, reflecting a strong wait-and-see sentiment. This week's market correction was mainly impacted by external geopolitical risks. The U.S.-Iran conflict exhibited a "fighting while talking" situation, with extreme gamesmanship causing violent fluctuations in commodity prices; the Shanghai Composite Index fell 3.63% in a single day on March 23, reflecting concentrated risk aversion. Meanwhile, domestic core broad-based ETFs continued to experience net redemptions, and with the earnings report disclosure period approaching, the market's cautious attitude towards performance uncertainty further suppressed risk appetite. However, structural opportunities remain prominent. The non-ferrous metals sector led with a 2.78% increase, as geopolitical risks generated safe-haven demand, with Zimbabwe's lithium export ban continuing and aluminum supply from the Middle East contracting, collectively reinforcing concerns on the supply side The utility sector rose by 2.50%, with total electricity consumption in society from January to February increasing by 6.1% year-on-year, improved costs for thermal power, and clear policies on electricity collaboration indicating a positive outlook for green electricity consumption. The basic chemical sector rose by 2.31%, driven by rising international oil prices and the demand for fertilizers in spring farming, leading to an upturn in the agricultural chemical industry chain. The pharmaceutical and biotechnology sector rose by 1.56%, as the "Government Work Report" first listed biomedicine as an emerging pillar industry, accelerating the overseas expansion of innovative drugs, with some leading companies achieving annual profitability for the first time, catalyzing valuation recovery. In the Hong Kong stock market, southbound funds had a net sell of HKD 2.883 billion on March 26, but cross-border ETFs continued to "attract capital," indicating long-term investors' recognition of the Hong Kong technology sector. The commodity market overall strengthened, with COMEX gold futures rising by 2.59% and silver futures by 2.70%. Russia's suspension of ammonium nitrate exports further exacerbated global agricultural supply tightness expectations. In the short term, the evolution of geopolitical conflicts will be a core variable next week. After a sudden escalation in the latter half of the week, the direction of the situation remains unclear, and any further military actions could trigger significant market volatility. As we enter April next week, U.S. non-farm payroll and inflation data will be released sequentially. If inflation exceeds expectations, it may reinforce tightening trading logic. The A-share market is expected to maintain a fluctuating pattern in the short term, as the market has not yet fully priced in the risks of "stagflation" and valuation compression. It may be wise to wait for clearer circumstances before making decisions. Short-term defensive strategies are currently favored, with increased attention on defensive sectors such as banking, utilities, and essential consumer goods, as well as new energy and electricity related to energy independence. Recently, leveraged funds have concentrated on defensive sectors like utilities, indicating a rising preference for risk aversion. In the medium to long term, the market's pricing of "stagflation" risks is expected to gradually clarify in April and May. With the disclosure of first-quarter reports, the release of U.S. data, and the approach of war-related milestones, the main theme of the market this year is likely to emerge during this period. The Middle East conflict mainly affects short-term sentiment and operational rhythm, but it will not change the medium to long-term positive direction of the A-share market. Under the continued "dual easing" of fiscal and monetary policies, ongoing household savings entering the market, and continuous breakthroughs in AI technology, the foundation of this round of A-share market remains solid. Regulatory authorities have signaled "stabilizing the capital market," and subsequent measures to stabilize the market are worth looking forward to, with a loose liquidity environment expected to continue. In terms of industry rotation rhythm, the market is expected to present a "technology growth + pro-cyclical" dual mainline pattern by 2026, with a balanced style configuration being the strategic backdrop for this year. Upstream resources and advanced manufacturing have become the "greatest common divisor" of market attention, with non-ferrous metals and basic chemicals benefiting from global supply disruptions and domestic demand recovery; the power chain (electricity, energy storage, grid equipment) possesses both defensive attributes and energy substitution logic, highlighting its allocation value during the oil price upcycle. Additionally, AI computing hardware and storage chips have gradually digested valuation pressure after adjustments and still possess value for low-position layouts. Overseas expansion and export chains have relatively strong performance certainty supported by overseas demand and can serve as a supplementary direction for medium to long-term balanced allocation