---
title: "If Oil Prices Peak, How Will Major Asset Classes Be Priced?"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/283572295.md"
description: "GF Securities points out that oil prices show signs of peaking, with two possible subsequent trends: either grinding at high levels or a rapid decline, each implying different asset allocation logic. Under both scenarios, equity markets will rebound, but the timing is determined by the inflation peak rather than the oil price peak; if oil prices grind at highs, stagflation expectations rise, boosting gold and energy performance, while industrial metals face pressure if a recession emerges; in a scenario of rapid oil price decline, gold sees no trend-driven rally, while industrial metals begin to rise after demand recovery"
datetime: "2026-04-22T00:08:28.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/283572295.md)
  - [en](https://longbridge.com/en/news/283572295.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/283572295.md)
---

# If Oil Prices Peak, How Will Major Asset Classes Be Priced?

The ongoing US-Iran conflict continues to disrupt global markets, causing violent fluctuations in oil prices and showing signs of peaking. **After the war-driven oil price increase peaks, the subsequent trend may take one of two forms: grinding at high levels or a rapid decline. The pricing logic for equities, gold, industrial metals, and energy products differs significantly under these two patterns.**

Geopolitical tensions between the US and Iran have shifted again this week. However, after three months of geopolitical trading, market risk appetite has recovered somewhat, gradually becoming numb to negative news, with the pricing focus tilting towards expectations of a ceasefire.

According to analysis by the GF Securities strategy team, **under both oil price trends, equity markets will rebound, but the timing is determined by the inflation peak rather than the oil price peak; if oil prices grind at high levels, stagflation expectations rise, leading to strong performance in gold and energy products, while industrial metals face pressure if a recession occurs; in the event of a rapid oil price decline, gold will not see a trend-driven rally, while industrial metals will begin to rise after demand recovers.**

From the perspective of current major asset class recovery progress, the S&P 500, Nasdaq Composite, ChiNext Index, and Nikkei Index have fully recovered their losses since the start of the war. In contrast, the Shanghai Composite Index, Hang Seng Tech Index, South Korea's KOSPI, the 10-year US Treasury bond, and gold assets have yet to complete their recovery, resulting in significant divergence.

## **Grinding at Highs, Rapid Decline, and Pre-War Macro Fundamentals Are Key**

Historically, oil price peaks driven by war generally present two patterns: first, oil prices maintain a state of grinding at high levels after peaking; second, oil prices rapidly fall back to pre-war levels after peaking.

GF Securities reviewed five typical geopolitical conflicts: the First Oil Crisis (1973), the Second Oil Crisis (1979), the Gulf War (1990), the Kosovo War (1999), and the Russia-Ukraine Conflict (2022). It found systematic differences in asset trends under the two paths.

The grinding pattern is represented by the two oil crises and the Kosovo War, while the rapid decline pattern corresponds to the Gulf War and the Russia-Ukraine Conflict.

Pre-war macroeconomic fundamentals are the key variable determining the depth of the shock.

Before the First Oil Crisis, the US manufacturing PMI was long above 50, even exceeding 60, indicating an overheating economy. The supply shock combined with robust demand significantly amplified stagflation risks.

Before the Gulf War, US GDP growth had already fallen from over 4% in 1988 to 2.41% in the quarter prior to the outbreak, as the economy was heading toward recession, making oil shocks easier to digest quickly.

## **Equity Markets: The Inflation Turning Point Is the Core Signal for Rebound**

Historical data shows that equity markets rebound under both oil price patterns, though the paths and timing differ. Under the grinding pattern, the rebound takes longer but offers stronger elasticity; under the rapid decline pattern, the rebound starts more quickly.

The core signal determining the timing of the rebound is not the oil price peak, but the inflation peak. The impact of oil prices on equity markets is bound to the transmission chain of "high oil prices → high inflation → erosion of corporate profits and tightening liquidity." Five war cycles have verified:

**The oil price peak appears before the inflation peak. Equity markets face pressure in the late stage of rising inflation. Only when year-over-year CPI turns downward from its high does the trend-driven upward rally begin.**

**It is worth noting that industrial prosperity can break this traditional chain.** During the Kosovo War, despite oil prices grinding at high levels, the upswing in the internet technology revolution coincided with the Federal Reserve's preemptive rate hikes effectively anchoring inflation expectations. As a result, US CPI peaked only slightly higher, providing extremely strong internal support for equity markets.

## **Gold, Industrial Metals, and Energy Products: Divergent Performance Among Three Asset Classes**

**Gold** experiences more significant medium-to-long-term gains under the grinding pattern. In the context of high oil prices grinding at highs, stagflation expectations strengthen, giving gold highly certain performance. This was evident during the First and Second Oil Crises and the Kosovo War, where clear rallies occurred. In the two cases of rapid oil price declines—the Gulf War and the Russia-Ukraine Conflict—gold mainly filled the gaps caused by prior rate hike expectations rather than initiating a trend-driven rally.

**Industrial Metals:** Taking copper as an example, under the grinding pattern, copper prices initially rise due to inflation expectations but subsequently fall as recession sets in, opening a supply-demand gap. Under the rapid decline pattern, copper prices remain volatile initially and only rise once clear recovery signals emerge.

**Energy Products:** LNG has a strong correlation with oil prices: under the grinding oil price pattern, LNG prices continue to rise; under the rapid decline pattern, LNG prices also fall rapidly in sync.

**US Dollar Index:** Overall, the correlation with oil prices is limited; the long-term trends of the two do not exhibit a strict mirror-image relationship. Under the grinding pattern, the dollar index oscillates and trends slightly higher, then falls later as economic recession and rate cut expectations intensify. Under the rapid decline pattern, the dollar index remains weak.

## **Post-Conflict Policy Response: Dynamic Trade-off Between Fighting Inflation and Resisting Recession**

After the geopolitical conflict shock subsides, developed economies follow systematic patterns in macroeconomic policy responses. Under sustained high oil prices and high inflation, a combination of rate hikes followed by rate cuts is common; under rapid declines in oil prices and inflation, monetary policy tends to move directly to rate cuts.

During the First Oil Crisis, the Federal Reserve initially adopted "accommodative" easing to counter economic downturns. However, combined with supply shocks, inflation expectations spiraled out of control, with PPI and CPI soaring to double digits in 1974. Subsequently, it was forced into aggressive tightening, which ultimately curbed inflation but exacerbated a deep recession, before restarting a rate-cut cycle.

After the Gulf War, facing the combination of "supply shock + weakening demand," the Fed quickly shifted its policy focus from fighting inflation to countering recession and credit contraction risks. With CPI gradually declining and oil prices peaking and falling, the Fed accelerated the pace of rate cuts, achieving relatively quick economic recovery.

On the energy and industrial policy front, both oil crises triggered energy structure transitions in Western countries. After the crises, nuclear power generation in the US, Europe, and Japan showed sustained rapid growth. France launched the "Mesmer Plan" to build nuclear power plants on a large scale, while Japan viewed nuclear power as a strategic choice to reduce dependence on oil.

**Combining current US March inflation data, the actual impact of high oil prices on inflation is weaker than expected. Subsequent policy may prioritize addressing recession risks, accelerating rate cuts once inflation pressures ease.**

## **Outlook for Current Major Asset Classes: Hong Kong Stocks Highlight Value, Gold's Medium-Term Trend Strengthens**

From an asset outlook perspective, GF Securities provides the following judgments on various asset classes:

**US Stocks:** Fundamentals remain relatively excellent, with AI industry trends continuing upward, making a continued strong performance in the medium term highly probable. However, short-term technical indicators are in overbought territory. Part of this loss recovery comes from short covering and inflows from CTA trend-following strategies rather than active buying by bulls. Risks of some tech sectors missing earnings expectations should be monitored.

**Hong Kong Stocks:** Short-term value proposition is relatively prominent. The Hang Seng Tech Index has yet to recover its losses since the war began, and valuations have dropped to low levels. If ceasefire positive news materializes, there is considerable room for rebound.

**A-Shares:** Recently, the ChiNext Index has significantly outperformed the Shanghai Composite Index, primarily because first-quarter earnings in growth sectors like AI Infrastructure and New Energy exploded collectively. The seven major weights of the ChiNext are concentrated in prosperous sectors such as lithium batteries and optical modules. Allocation structure matters more than position size. Recommendations revolve around four themes: energy storage and lithium batteries; domestic AIDC (including semiconductors); overseas AI infrastructure chains; and AI short dramas/comics.

**Gold:** The medium-to-long-term bullish logic continues to strengthen. On one hand, central banks' monthly net gold purchases remain stable at positive values with marginal increases. On the other hand, if the US loses control of the Strait of Hormuz, the petrodollar hegemony will weaken, reducing the dollar's store-of-value capability, thereby benefiting gold relatively.

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