Under geopolitical crisis, the photovoltaic, wind power, and electric vehicle industrial chains are becoming national strategic assets.

How AI · How Geopolitical Crises Are Reshaping the Valuation Logic of New Energy?

(Author: Fan Zhongchen, Assistant Professor at the School of Economics and Finance, Xi’an Jiaotong University)

The renewed tightening of the Middle East situation has caused market expectations for a ceasefire to cool down gradually. For global investors, this may no longer be just a short-term geopolitical shock but a key event that could profoundly impact the valuation framework of major asset classes. As the conflict in the Middle East continues to intensify, especially with multiple uncertainties surrounding oil supply, maritime security, and regional power struggles, energy security has once again become a core issue.

This means that the logic of global asset pricing is shifting from a single interest rate-driven model to a multi-dimensional resonance of interest rates, geopolitics, and energy security.

In this context, who will benefit and who will be under pressure are no longer just the result of risk appetite fluctuations but also reflect deeper supply shocks and strategic reassessments.

1. Traditional Energy Assets: Re-examining Risk Premiums

Whenever Middle East risks escalate, the oil market tends to react first. The reason is that market concerns are usually not about the current supply gap but about tail risks such as future transportation disruptions, soaring insurance costs, restricted shipping lanes, or even supply chain interruptions.

Once such expectations form, oil prices’ rise is no longer limited to commodity price fluctuations but can become a cost anchor within the macro system. As the source of energy and the mother of industry, rising crude oil prices not only directly increase fuel costs but also transmit through petrochemical chains to broader industrial sectors.

Looking back at history, the most profound impacts of the two oil crises in the 20th century were not just the jumps in oil prices but their reshaping of global economic operation logic. Rapid energy price increases often lead to imported inflation, squeezed corporate profit margins, and reduced residents’ real purchasing power, which then transmit pressure from commodity markets to financial markets and eventually influence macro policies.

Of course, today’s world is markedly different from the 1970s. The global energy structure is more diversified, and major economies have more policy tools at their disposal. But the fundamental principle remains: when geopolitical shocks hit energy supply, markets instinctively reassess the balance between inflation, growth, and monetary policy. In this process, crude oil may regain some degree of macro pricing power, and traditional energy assets could see higher risk premiums.

2. Rising Chemical Raw Material Prices: Broader Chain Reactions

Compared to fluctuations in oil prices themselves, the transmission effects on chemical raw materials are also noteworthy. Oil and natural gas are not only fuels but also critical industrial raw materials. Petrochemical products like ethylene, propylene, aromatics, etc., form the cost basis for plastics, fibers, rubber, coatings, fertilizers, and many intermediate inputs. When upstream oil and gas prices rise, midstream refining costs increase accordingly, potentially squeezing profits in downstream manufacturing.

This explains why, during geopolitical escalations, markets not only focus on oil companies but also monitor trends in the chemical industry chain. Typically, resource extraction, drilling, and oilfield services may benefit relatively, while downstream chemical industries and manufacturing sectors heavily reliant on transportation may face more pressure. Moreover, this impact may not be confined within industrial systems; rising chemical raw material prices can eventually permeate through packaging, logistics, agricultural inputs, and durable goods manufacturing, pushing up broader price levels. For global capital markets, this suggests that the previously easing inflation trade logic might be reactivated.

3. Financial Markets: Repricing the Tail Risks of Stagflation

If energy and chemicals are the first wave of shocks, the second wave will transmit to financial markets. During rising geopolitical risks, safe-haven assets like gold and the US dollar typically strengthen. However, the complexity this time lies in the fact that risk events are compounded by energy supply disruptions rather than mere sentiment-driven safe-haven flows. In other words, markets may face not just typical risk aversion but a form of re-inflationary safe-haven trade.

This could create a dilemma: on one hand, capital flows into safe assets; on the other hand, long-term interest rates may not decline significantly because high oil prices could elevate future inflation expectations, constraining the room for monetary easing.

Although the current situation is far from the severity of the 1970s oil crises, if stagflation tail risks re-enter the trading horizon, market style preferences may shift. Assets with high valuations, high leverage, and strong cyclical exposure could become more vulnerable, while assets with stable cash flows, resource attributes, and safety premiums might attract more capital.

4. Industry Differentiation: Challenges for High Energy Consumption and High Transportation Dependency Sectors

At the industry level, sectors sensitive to fuel prices and logistics costs are likely to be the first to suffer. Airlines, shipping, downstream chemicals, certain manufacturing, and long supply chain foreign trade enterprises may face dual pressures: rising energy costs and increased shipping and insurance costs leading to logistical frictions. If the situation persists, these industries may see profit margins shrink and valuation levels decline.

The underlying logic is clear: geopolitical risks elevate global supply chain friction costs, prompting capital markets to favor companies with strong local supply capabilities, controllable energy costs, and lower external transportation reliance. Corporate competitiveness evaluations are expanding from cost and technology to resilience and security.

5. Deep Structural Changes: The Rising Advantage of New Energy Strategies

Focusing solely on traditional energy price increases is insufficient to fully understand this round of asset revaluation. A more long-term shift may be the further emergence of the relative advantages of new energy assets.

After the oil crises of the 20th century, the world began systematically emphasizing energy conservation, alternative energy, and diversification. Today, a similar logic is playing out in new forms. The difference is that this time, new energy is not only an environmental issue but also a matter of security; not just a long-term transition but a practical choice to reduce external dependencies.

As oil and gas prices become more susceptible to geopolitical shocks, major economies are accelerating investments in renewables, power grids, energy storage, and electrification. From a national security and industrial security perspective, wind power, photovoltaics, new storage solutions, electric vehicles, and related infrastructure are fundamentally about reducing reliance on external fossil fuels and strengthening energy system autonomy and resilience.

This implies that the valuation logic of the new energy sector is evolving. Previously, markets viewed it mainly from growth perspectives; now, it may increasingly see it as a security or strategic asset. Particularly in areas like photovoltaics, wind power, energy storage, grid upgrades, and electric vehicle supply chains, their strategic value is not only based on carbon neutrality narratives but also on the reassessment of energy security.

6. From Efficiency Priority to Safety and Efficiency Balance

Over the past decades, global capital flows and industrial layouts have generally prioritized efficiency: capital moves toward low-cost, resource-rich, and easily transportable regions. However, amid rising geopolitical tensions, markets are increasingly aware that a purely efficiency-driven global configuration may be fragile. Therefore, the underlying asset pricing logic is subtly changing: safety, resilience, and autonomy are now becoming as important as efficiency, growth, and profit.

From this perspective, the ongoing tension in the Middle East may not only temporarily push up oil, gas, and chemical raw material prices and reshape inflation and interest rate expectations in the medium term but also elevate the strategic importance of new energy, energy storage, and infrastructure in the long run. Just as the 20th-century oil crises forced the world to rethink energy’s dominance over the economic system, today’s similar shocks may lead markets to a clearer consensus: those who can effectively reduce dependence on unstable external energy sources are more likely to take the lead in the next global asset revaluation.

First Financial Exclusive, First Finance Account. The views expressed are solely those of the author.

(This article is from First Financial)