GF Securities: A Review of Five Oil Crises — What Are the Patterns in Industry Rotation?

Guangfa Securities released a research report saying it will maintain its core conclusions: First, the index needs some time to bottom out; second, in the “April decision,” focus on some independent high-visibility sectors that have little to do with overseas high oil prices, high inflation, or high interest rates, including new energy, domestic AIDC, and overseas computing power, among others.

The closure of the Strait of Hormuz and its impact on the global economy:

(1) The Dallas Fed’s forecasting model shows that by the end of Q2 2026, the probability that the Strait of Hormuz remains closed is still 58%; the results from the betting website KALSHI Trading also show that the probability that the Strait of Hormuz remains passable before July 2026 is 63%;

(2) The closure of the Strait of Hormuz would not only directly reduce oil supply by nearly 20%, but also reduce LNG supply by about 20%, reduce urea by about 30%, reduce ammonia and phosphate by about 20%, and reduce sulfur by about 50%.

(3) The Dallas Fed’s model shows that if the Strait of Hormuz is closed for one quarter and there are no other mitigating channels, it will push the average global Q2 WTI crude oil price up to $98 per barrel, and reduce the global GDP growth rate in Q2 by 2.9 percentage points from the initial level—current higher-probability scenario pricing: Q2 shock, Q3 recovery, without a substantive recession.

Which historical episode is the current oil crisis most like?

After oil prices rise during wartime, the pattern could take one of the following forms: 【1】a quick drop after the pulse, 【2】staying at a high level after the pulse.

Compared with history, the current oil crisis:

(1) Economic cycle: Before the outbreak of war, the economy was in a stage of fiscal easing and demand recovery, similar to the recovery state during the Kosovo War.

(2) Monetary cycle: Before the outbreak of war, the economy was in a rate-cutting cycle, similar to the monetary environment during the Gulf War; but now it is rate cuts during a normalization phase of monetary policy, whereas back then it was rate cuts during a recessionary cycle.

(3) Oil price trend: In the first and second oil crises, due to ongoing constraints on crude oil supply, oil prices remained at a high level; during the Kosovo War, due to OPEC production cuts layered with rising demand, oil prices remained high; meanwhile, there were two times when oil prices saw a pulse-and-fall, during the Gulf War (oil prices returned to their pre-war level in 6 months) and the Russia-Ukraine conflict (oil prices returned to their pre-war level in 3 months).

Reviewing the market and sector performance after several wartime crisis episodes:

(1) Directions with excess returns during the crisis: first, oil, precious metals, and defense/arms manufacturing catalyzed by war; second, defensive dividend sectors such as telecommunications and tobacco—but if the market turns bearish, defensive categories may also underperform in the late stages of a bear market, as in Aug–Sep ’74; third, directions with strong industrial trends, for example, big consumer spending in the 1980s and big high-tech in the 1990s.

(2) Excess returns in oil and natural gas generally move along with oil prices reaching their peaks and then peaking; and the sectors most impacted by high oil prices are typically tourism and leisure.

(3) If oil prices remain at high levels for a longer time after the oil-price pulse, it is necessary to further discuss the extent of the shock to inflation and demand: the first oil crisis is a negative case (entering a stagflation period), the second oil crisis is a positive case (the war shock lasts only 1 month), and the Kosovo War is also a positive case (the oil-price impact tapers in).

(4) If oil prices fall after the pulse, then after the market briefly reflects the war factor, it typically returns to its original operating track (the mainline sector themes differ by decade); and even capital may concentrate toward directions with more certain growth, such as defense/arms around 1980, consumption around 1990, and technology in the late 1990s.

Endless information, precise interpretation—only on the Sina Finance APP