On February 28th, a severe explosion occurred in Tehran, Iran's capital, with approximately 30 domestic targets simultaneously attacked. Security officials confirmed that this military action was jointly carried out by the United States and Israel. Israel's Defense Minister subsequently declared a nationwide state of emergency. Iranian officials issued a stern response, stating they are preparing a "devastating" retaliation.
Driven by this sudden geopolitical event, market sentiment surged during the early trading session in the A-share market. Stocks including Tongyuan Petroleum, Zhongman Petroleum, China Oilfield Services, and Xinjin Dynamic (formerly Intercontinental Oil & Gas) rose strongly to the daily limit-up. Potential Energy opened with gains exceeding 10%. International oil prices soared concurrently, with Brent crude futures surging 13% to $82 per barrel and WTI crude futures rising over 10% to $75 per barrel. Capital rapidly flowed into energy and safe-haven assets, providing immediate pricing for the geopolitical risks.
**Supply Constraints: Iran's Chemical Production Capacity Faces Shutdown** As OPEC's third-largest oil producer, Iran maintains a daily crude oil production between 3.3 and 3.5 million barrels, accounting for 3% of global supply. The country also possesses abundant natural gas reserves, ranking third globally in production. Leveraging its low-cost natural gas advantage, Iran has established substantial downstream processing capacity, holding a significant share in the global supply of methanol, urea, ethylene glycol, and sulfur.
Chen Yi, Chief Chemical Industry Analyst at Sinolink Securities Co., Ltd., analyzed that if the conflict persists, chemical production within Iran will be hindered, leading to a decline in export volumes. Although China's imports of methanol, ethylene glycol, polyethylene, and sulfur from Iran have decreased in 2025, import dependency still exists, creating a tangible impact on the supply and demand dynamics of related chemical products domestically. Given that inventory levels among domestic downstream enterprises are generally low, short-term restocking demand is urgent. The supply gap could rapidly translate into upward pressure on prices.
**Investment Rationale: Resource Endowment and Export Capability Become Key** March coincides with the peak spring farming season in the Northern Hemisphere, supporting rigid demand for the transportation of nitrogen, phosphorus, and potash fertilizers. Chen Yi believes that if the conflict deepens, rising global fertilizer prices will enhance profit realization for domestic agricultural input companies through exports. While current domestic fertilizer policy primarily focuses on ensuring supply and stabilizing prices, the widening price differential between domestic and international markets may create new arbitrage opportunities. However, the sharp increase in logistics costs will also be directly passed on to end-product agricultural prices.
Chen Yi further analyzed that the U.S.-Israel strikes on Iran intensify uncertainty regarding energy supply and transportation. The supply of globally priced products primarily exported by Iran, such as methanol, urea, ethylene glycol, and polyethylene, is expected to contract, leading to anticipated price increases. The combined effect of transportation risks in the Strait of Hormuz and rigid downstream demand will further drive up prices for oil, gas, and agricultural input products.
Investors should focus on the following areas: 1. Leading chemical companies with upstream resource endowment and export capability: Enterprises with integrated industrial chain advantages demonstrate stronger risk resilience. 2. Coal chemical companies: Their cost advantages become prominent against the backdrop of high oil and gas prices. 3. Companies with overseas production capacity layouts: These can effectively mitigate risks associated with a single region.
Currently, the focal point of market speculation centers on the navigation status of the Strait of Hormuz. The U.S. Navy's Fifth Fleet is already deployed in the area, while Iran's Revolutionary Guard Corps claims the capability to blockade the strait. An escalation in military confrontation could lead to temporary disruptions to shipping lanes. The duration of any supply chain interruption will determine the magnitude of the price rebound. In the short term, a pulse-like price surge is highly probable. Medium to long-term trends will depend on the speed of conflict resolution and the development of alternative supply sources.
*This section presents industry perspectives and does not constitute investment advice. Investors should not rely solely on this information for making decisions. While efforts are made to ensure accuracy, the completeness or reliability of the information is not guaranteed, and no liability is accepted for any losses arising from its use. Investment involves risks; caution is advised when entering the market.*
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