The Iran-Israel-US conflict triggers a market sell-off as the Hang Seng falls to a multi-week low on energy fears
Markets Rattle as the Strait of Hormuz Crisis Hits Home
For weeks, Hong Kong and mainland Chinese stocks had defied global headwinds, riding a wave of AI enthusiasm, policy optimism, and renewed investor confidence. That run hit a wall in early March 2026 as the crisis in the Middle East escalated sharply, with US-Israeli strikes on Iran, the closure of the Strait of Hormuz, and the sudden collapse of Gulf shipping routes sending shockwaves through every market that depends on stable energy supplies and open sea lanes — which is to say, essentially all of them.
The Hang Seng Index, which had been trading near decade-highs as recently as late February, dropped more than 290 points in a single session, closing at a two-month low of around 25,768. The Hang Seng Tech Index fell sharply. Gold mining stocks, which had been among the strongest performers on the exchange — Zijin Gold International gained roughly 150 percent in 2025 — reversed violently, with Zijin Gold shedding nearly 9 percent in one session as investors reassessed the risk environment. The irony was sharp: a market that had rallied partly on gold’s appeal as a safe-haven asset was now being punished because war itself had arrived.
The Hormuz Factor and China’s Vulnerability
The Strait of Hormuz is not an abstraction for China. Roughly 40 percent of the world’s seaborne oil passes through the narrow waterway between Iran and Oman. China is the world’s largest oil importer. When Iran’s Revolutionary Guards claimed control of the strait and state-run shipping giant COSCO suspended Gulf services, the implications for Chinese refineries, energy prices, and industrial production were immediate and severe. Some Chinese refineries began shutting down or moving up maintenance schedules in anticipation of supply disruptions. Oil prices surged by more than 1 percent in a single session, stoking inflation fears in an economy already struggling with weak consumer demand.
The broader market sentiment shift was palpable. Investor appetite — which had been cautiously rebuilt since Beijing’s 2024 policy stimulus and the AI-driven rally of 2025 — was suddenly competing with geopolitical risk of the most serious kind. US stock futures tumbled. Risk assets globally came under pressure. Hong Kong, as an international financial hub deeply tied to both Chinese economic fundamentals and global capital flows, was doubly exposed.
Winners and Losers in a Volatile Session
The damage was not evenly distributed. Technology stocks led the declines, with Xiaomi losing more than 5 percent, SMIC down nearly 5 percent, and Meituan falling more than 4 percent. Travel stocks were also hit, with Cathay Pacific shedding more than 4 percent as the broader aviation sector faced questions about Middle East route disruptions and surging jet fuel costs. Property developers continued their long slide. Pop Mart, the collectible toy maker that had been one of the market’s darlings, fell nearly 6 percent.
The only bright spots were energy-related stocks, as investors rotated into companies that would benefit from higher oil prices. ENN Energy, Hong Kong and China Gas, and Kunlun Energy all gained as crude’s surge improved their revenue outlook. These gains, however, were far outweighed by losses elsewhere.
What Happens Next: The NPC Meeting and the US-China Dynamic
Markets were not entirely without hope. Reports emerged during the period of sell-off that US and Chinese officials were scheduled to meet in Paris the following week to discuss business agreements ahead of an expected summit between Presidents Trump and Xi Jinping in April. Any signal of stability in the US-China relationship — which had been strained by Trump’s tariff escalation — could provide a floor under the market.
China’s National People’s Congress, which opened on March 4, was expected to announce a GDP growth target of between 4.5 and 5 percent for 2026 — a marginal reduction from prior targets that reflected growing economic caution without triggering alarm. Beijing’s willingness to deploy fiscal support was seen by many analysts as a key support factor for the market through the remainder of the year.
For investors, the episode is a reminder that Hong Kong’s financial markets — despite their geographic and institutional ties to the mainland — remain deeply exposed to global geopolitical events. The Hang Seng had been rebuilt on optimism about AI investment, domestic consumption recovery, and Greater Bay Area integration. None of those stories have fundamentally changed. But when a war closes one of the world’s most important shipping lanes, no market is an island. Investors tracking the situation should monitor the IMF World Economic Outlook, the Bank for International Settlements quarterly report, and the Energy Intelligence service for authoritative assessments of how the Hormuz crisis may reshape global energy markets. The road to recovery for Hong Kong stocks runs through Beijing’s policy choices, Trump’s diplomatic calendar, and the guns of a war neither China nor Hong Kong started — but both will pay for.
Emily Chan
Investigative & Social Affairs Journalist, Apple Daily UK
Contact: emily.chan@appledaily.uk
Emily Chan is an experienced investigative and social affairs journalist whose reporting centers on public accountability, social justice, and community-level impact. She received formal journalism training at a top-tier Chinese journalism school, where she specialized in investigative methods, data verification, and media ethics, preparing her for high-responsibility reporting roles.
Emily has published extensively with Apple Daily and other liberal Chinese newspapers, producing in-depth coverage on labor rights, education policy, civil society organizations, and government transparency. Her work is grounded in firsthand reporting, long-form interviews, and careful document review, ensuring factual accuracy and contextual depth.
Her newsroom experience spans both daily reporting and long-term investigations, giving her practical expertise in handling sensitive sources, corroborating claims, and navigating legal and ethical constraints. Emily is known among editors for her disciplined sourcing practices and clear, evidence-led writing style.
Emily’s authority stems from sustained professional experience rather than commentary alone. She has contributed to coverage during politically sensitive periods, maintaining accuracy and editorial independence under pressure. Her reporting consistently adheres to correction protocols and transparency standards.
At Apple Daily UK, Emily Chan continues to deliver reliable journalism that informs readers through verifiable facts, lived reporting experience, and a commitment to public-interest storytelling.
