The situation concerning Iran continues to introduce uncertainty into capital markets. Last week, the Hang Seng Index primarily trended downwards. The anticipated event materialized on the afternoon of February 28th, when Israel launched a preemptive military action codenamed "Roaring Lion" against Iran. Iran's Supreme Leader Ayatollah Khamenei was killed in the attack. Former Iranian President Mahmoud Ahmadinejad was also killed, and several Iranian military commanders were confirmed dead. The Islamic Revolutionary Guard Corps stated that the "most severe offensive operations" by Iranian armed forces are imminent, targeting bases belonging to Israel and the United States. Later, the Islamic Revolutionary Guard Corps announced a ban on all vessel traffic through the Strait of Hormuz.

Domestically, the fourth sessions of the 14th National People's Congress and the 14th National Committee of the Chinese People's Political Consultative Conference are scheduled to open on March 5th and March 4th, respectively. These meetings will discuss the government work report and other relevant reports, as well as the draft outline for the 15th Five-Year Plan for National Economic and Social Development. The US February non-farm payroll data and the Federal Reserve's Beige Book will be released concurrently. If the data falls short of expectations, it might offer a glimmer of hope for an interest rate cut in March.

This week's market focus is undoubtedly the Middle East conflict. While the US-Israeli surprise attack achieved a successful decapitation strike, it did not accomplish regime change. Iran's Secretary of the Supreme National Security Council, Ali Larijani, stated that an interim leadership committee will be established shortly to elect a new Supreme Leader. The identity of the eventual appointee will significantly influence the future trajectory of the conflict. Consequently, markets will revolve around this risk event, with initial focus on sectors such as oil and gas, gold, shipping, and non-ferrous metals. If the situation shows signs of easing later, opportunities in areas like AI computing power and cloud services could be considered. It was reported that US forces utilized Anthropic's AI tool during the airstrikes on Iran; media also released details about its latest large language model, V4.

**Stock of the Week: COSCO SHIP DEV (02866)** Escalating political tensions in the Middle East may further elevate risk premiums. Recently, the tanker market has been booming, compounded by geopolitical instability, driving VLCC spot rates above $200,000 per day. According to Baltic Exchange data, as of February 26th, the Baltic Dirty Tanker Index VLCC TD3C route Time Charter Equivalent reached $209,000 per day, hitting a new high since April 2020. On the demand side, overall conditions are robust, with strong demand for long-haul routes. Expectations of rising crude oil prices might prompt earlier import demand, though the potential dampening effect of high oil prices on demand requires monitoring. On the supply side, beyond medium to long-term factors like slow VLCC fleet growth and vessel aging, short-term reductions in market supply are being marginally driven by an increasing scale of sanctioned tankers and high utilization of floating storage capacity. Clarksons Research data indicates that by early 2026, approximately 20% of the global VLCC fleet will be over 20 years old, with 42% over 15 years old. Deliveries in 2026 are projected to increase compared to 2025, with fleet size growing by 3.2% year-on-year. Driven by strong freight rates and active trading, second-hand tanker prices continue to rise. By the end of February, Clarksons' second-hand tanker price index had increased about 9% since the start of the year, with prices for 10-year-old VLCCs rising over 20%. The company focuses on the shipping logistics industry, specializing in container manufacturing, container leasing, and shipping leasing as its core businesses. In the container manufacturing segment, capacity utilization remains high, with special container business performing notably well; production of open-top and collapsible containers has increased year-on-year. In the container leasing segment, the company is accelerating its global footprint, now covering over 180 ports in more than 43 countries. In shipping leasing, the company is actively promoting ship-related finance projects in 2025, increasing the proportion of methanol-ready, environmentally friendly vessel types, aligning with the trend towards greener shipping.

**Industry Perspective: 1970s vs. 2020s Commodity Gains** During the 1970s, commodities with significant price appreciation were primarily crude oil (due to war factors) and gold and silver (following the collapse of the Bretton Woods system and the decoupling of the US dollar from gold). From 2020 to the present, commodities showing substantial gains are mainly strategic metals like tungsten and antimony (against the backdrop of major power competition) and gold and silver (driven by a revaluation stemming from perceived weakening US dollar credibility). Strategic stockpiling increases demand and valuation for critical metals. In the context of significant global changes, nations are placing greater emphasis on resource security. Stockpiling not only adds extra demand for metals but also enhances the valuation of related metal stocks. Everbright Securities suggests that strategic metal varieties likely to benefit from stockpiling currently include: (1) Gold and silver, undergoing revaluation amid major power competition; (2) Copper, aluminum, silver, and tin, required for AI and new energy development; (3) Military-related varieties like rare earths, tungsten, and antimony; (4) Essential metals where China and the US have relatively low mine production shares, such as uranium, molybdenum, and nickel. The value of strategic metals (copper, aluminum, cobalt, nickel, tin, zinc, tungsten, rare earths) is poised for reassessment. In the Hong Kong market, key stocks to watch include: for copper - Zijin Mining and China Molybdenum; for aluminum - Aluminum Corp. of China and China Hongqiao; for cobalt/nickel - Lygend Resources, Xinyu Mining, and CNGR Advanced Material; for gold - Zijin Mining International, Vanke Gold, Zhaojin Mining, and Datang Gold.

**Market Data Review** Hong Kong Exchanges and Clearing data shows the total open interest for Hang Seng Index Futures (March) is 115,233 contracts, with a net open interest of 45,225 contracts. The settlement date for the Hang Seng Index futures is March 30, 2026. With the Hang Seng Index around 26,631 points, the concentration of bull and bear certificates deviates from the central axis, indicating market hesitancy. As the annual report season progresses and the Middle East situation remains unstable, some Middle Eastern capital might seek refuge in Hong Kong. The outlook for the Hang Seng Index this week is bullish.

**Market Outlook** Influenced by the Middle East situation, safe-haven sectors such as gold, oil, petrochemicals, and defense are expected to see activity first, while technology and growth sectors might face sentiment pressure. However, it's important to note that historical experience suggests risk aversion driven by geopolitical conflicts often exhibits strong, pulse-like characteristics but weak persistence. Investors should closely track the subsequent evolution of the conflict. If the conflict does not spill over further, market sentiment could gradually recover within 3 to 5 trading days. If the conflict escalates continuously and navigation through the Strait of Hormuz remains obstructed, global supply chains and inflation expectations would be impacted simultaneously, potentially leading to a deeper structural reassessment in global equity markets. It is crucial to monitor developments in Iran, the navigation status of the Strait of Hormuz, and subsequent statements from the US and Iran closely, while also keeping a close watch on domestic policy developments. Maintain reasonable control over positions and consider appropriately increasing the proportion of defensive assets in allocations.