&#34;Ceasefire trades&#34; can happen quickly, but the market may have to wait for energy trade to flow smoothly again before truly pricing in a &#34;return to pre-war&#34; state.According to reports from the Zhuifeng Trading Desk, on March 27, Nomura's Japan team pointed out in their latest research report that a market narrative regarding &#34;ceasefire negotiations&#34; between the U.S. and Iran is taking shape. However, investors should focus on another variable: whether and when energy trade can &#34;normalize.&#34; The &#34;time lag&#34; between ceasefire and normalization will make the 2026 investment environment more difficult than before the war.&#34;'Ceasefire' and 'normalization of energy trade' are not synonymous.&#34; A ceasefire can indeed alleviate extreme market pessimism about the economy and effectively prevent a credit crunch in financial markets. However, until the path for restoring energy trade becomes clear, oil prices, business confidence, and monetary policy outlooks will struggle to return to pre-war states.The report's conclusion is explicit: &#34;In 2026, investors may have to operate under more 'stagflationary' conditions than previously expected.&#34; This means that even if the global economy is in a recovery phase, inflation and interest rates will be slightly higher than previous assumptions, while economic growth rates and stock valuations will be relatively suppressed.<h2>&#34;More Stagflationary&#34; Market Pricing: Rising Expectations for Central Bank Rate Hikes</h2>The market has already begun pricing a &#34;more stagflationary&#34; world into its valuations.Due to sticky inflation, expectations for interest rate hikes in major global economies are rising. Currently, the market has priced in expectations for three hikes in the UK, two in Europe, and 0.5 in the U.S. this year.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/dad3bb61-4d18-4496-ad20-3ca577b0dd2f.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/dad3bb61-4d18-4496-ad20-3ca577b0dd2f.png"/>However, the author also questions: if oil prices simply &#34;plateau at a high level,&#34; whether such aggressive hikes are truly necessary to suppress inflation remains &#34;debatable.&#34; In this &#34;stagflationary-leaning&#34; environment, central banks are highly prone to policy errors. If central banks hike too aggressively, the recovery will be stifled; if they don't hike enough, inflation will be stickier and term premiums will be higher.<h2>Shorting the Dollar Is Not Wise Before &#34;Normalization&#34;</h2>In discussions with numerous overseas investors, the firm found that two core consensuses have formed regarding &#34;ceasefire trades&#34;: buying U.S. Treasury steepeners and shorting the dollar.The first consensus is the steepening of the U.S. bond market's yield curve. The logic is clear: once a ceasefire is reached, market expectations for short-term Fed rate cuts will reignite, depressing short-end rates. Meanwhile, due to the residual effects of high crude oil prices and increased government fiscal spending to address the conflict and stimulate the economy, market inflation expectations and term premiums will rise significantly, pushing up long-end rates. With short rates falling and long rates rising, the curve naturally steepens.The second consensus is the decline of the dollar. During the conflict, the dollar was highly sought after as a safe-haven asset. Once a ceasefire is achieved and oil prices stabilize, the safe-haven dividend for U.S. markets will be greatly reduced, and capital will reverse its previous safe-haven flows. Additionally, the upcoming leadership transition at the Federal Reserve increases the unpredictability of U.S. policy, further accelerating the trend of capital exiting the dollar.In the firm's view, however, the primary significance of a ceasefire is to lower the probability of the &#34;worst-case scenario&#34;: for instance, a decrease in the risk of a sudden tightening of credit conditions and a recovery in risk appetite. But what truly determines the center for interest rates and inflation is whether the energy trade chain can return from being &#34;restricted, diverted, and price-distorted&#34; to being &#34;predictable, deliverable, and financeable.&#34;This explains a key judgment in the report: Before energy trade normalizes, the relative advantage of U.S. assets and the dollar may still be preserved.The reason is simple: the higher the uncertainty, the more capital favors markets with &#34;greater liquidity and depth&#34;; and if the energy chain is obstructed, it becomes harder for global inflation and term premiums to decline.<h2>Major Reshuffle in U.S. Stock Sectors: Capital Returns to Banks, Consumer Goods, and Capital Goods</h2>The shift in the macro environment will inevitably trigger a severe reshuffle at the micro-sector level. Sectors discarded during the conflict will become leaders in the ceasefire recovery phase.Since the conflict broke out, tech and energy stocks have performed well, while consumer goods, capital goods, real estate, and non-U.S. bank stocks have significantly underperformed. The core difference lies in the varying degrees of negative impact that high energy costs, financing constraints, and high policy rates have on different industries.But the tide is turning. &#34;Assuming a credit crunch can be avoided, bank stocks will outperform in the post-ceasefire phase,&#34; emphasizes author Hisao Matsuzawa.As energy trade moves toward normalization, expectations for a global economic recovery will heat up rapidly. At that time, capital goods and consumer-related stocks, which are highly sensitive to the economic cycle, will regain strong upward momentum. The extent of the rebound in the real estate market will depend on whether bond yields can stabilize.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/13d72eb2-1fc5-4b7c-a446-23a7b932e12a.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/13d72eb2-1fc5-4b7c-a446-23a7b932e12a.png"/><h2>Japan's Market Dilemma: Central Bank in a Bind, Lowered Equity and FX Forecasts</h2>For the Japanese market, a ceasefire itself is not enough; the normalization of energy trade is the critical factor.Japan is heavily dependent on energy imports. Until energy trade is restored, the conflict between imported inflation driven by high oil prices and weak domestic demand remains sharp. This puts the Bank of Japan (BOJ) in a difficult position.Hisao Matsuzawa points out: &#34;It will be difficult for the Bank of Japan to move its policy rate to a neutral level, and market concerns about it 'lagging behind the yield curve' will persist.&#34;As the central bank is forced to remain relatively restrained, inflation expectations will push up long-end yields. Therefore, it is expected that for a period after the ceasefire, the Japanese bond market's yield curve will steepen (at least in the 10-year segment), while the yen will continue to weaken, especially in cross-rates.Based on pessimistic expectations for this long tail of stagflation, Hisao Matsuzawa has comprehensively lowered his core forecasts for Japanese equities and the currency—cutting the target levels for the Nikkei 225 and TOPIX for each quarter of 2026-2027, and simultaneously lowering the exchange rate forecast for the yen against the dollar, believing that the yen will remain under significant pressure in the short term.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/d9368f79-4a70-4440-ba06-e370094f3e0a.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/d9368f79-4a70-4440-ba06-e370094f3e0a.png"/>

Recent escalation in Middle East conflicts has heightened market concerns over geopolitical risks. At the same time, international oil prices are fluctuating with the situation, impacting the global energy market and overall risk sentiment. Sectors such as energy, shipping, and technology could all face direct impacts.How long do you think the Middle East situation will affect the Hong Kong and U.S. stock markets? Is it a short-term fluctuation or a long-term impact? Feel free to share your thoughts!

Recent escalation in Middle East conflicts has heightened market concerns over geopolitical risks. At the same time, international oil prices are fluctuating with the situation, impacting the global energy market and overall risk sentiment. Sectors such as energy, shipping, and technology could all face direct impacts.How long do you think the Middle East situation will affect the Hong Kong and U.S. stock markets? Is it a short-term fluctuation or a long-term impact? Feel free to share your thoughts!

Escalating tensions in the Middle East—will oil price volatility stir the stock market?

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Nomura warns that even if a "ceasefire" occurs between the U.S. and Iran, it does not equate to an immediate normalization of energy trade. The time lag between the ceasefire and normalization could make the 2026 global environment more "stagflationary": inflation and interest rates will be passively pushed higher, while economic growth and stock valuations face pressure. During this period, the U.S. dollar and U.S. assets will maintain their relative advantage, and shorting the dollar should not be done prematurely

- The article discusses the market dynamics surrounding a potential ceasefire between the U.S. and Iran and its consequences on energy trading normalization.  
- It suggests that until energy trading returns to a stable state, financial conditions may remain tighter, impacting investment strategies for 2026.  
- Additionally, it highlights a shift in market expectations towards rising interest rates and a decline in the dollar, indicating significant sectoral shifts within the financial landscape.

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Even a "Ceasefire" Does Not Mean "Normalization"; 2026 Global Economy to Be More "Stagflationary" Than Expected