Is the US-Israel-Iran conflict affecting global stock markets, with A-shares falling the hardest?

War Leads to a Drop in A-Shares

On February 28, the United States and Israel launched a military strike against Iran, killing Iran’s top leader, Khamenei, on the first day. Iran responded by firing missiles and drones at U.S. and Israeli bases in the Middle East, achieving some tactical gains. The three sides have been engaged in intense fighting for four weeks, with no signs of the war stopping.

Due to Iran’s blockade of the Strait of Hormuz, global energy supplies are tight, causing oil prices to soar. The A-share market also entered a decline phase. On March 20, the Shanghai Composite Index fell below 4,000 points, erasing all gains made before the outbreak of the war. Since the beginning of the year, the index’s gain has turned into a -0.3% loss; in just 15 trading days in March, it dropped 4.94%.

The Shenzhen Component Index performed slightly better, declining 4.34% since the war began but still maintaining a 2.52% gain for the year. The ChiNext Index has been one of the best-performing indices globally, not only avoiding decline but actually rising 1.26% since the war started, with a year-to-date increase of 4.65%.

The CSI 300 Index, representing the top 300 stocks in Shanghai and Shenzhen, has underperformed, falling 1.36% this year. Its decline since the war began is only 3.05%, partly because it had a relatively low gain before the conflict. The STAR Market Composite Index experienced more volatility, dropping 9.72% after the war started but still gaining 2.03% for the full year.

Overview of Major Global Stock Indices This Year

Data Source: Wind Information

U.S. Stocks Decline More Than A-Shares

The U.S. stock market, long favored by domestic investors, has performed noticeably worse than A-shares this year. The Dow Jones Industrial Average, S&P 500, and Nasdaq 100 had little to no gains before the war, and after the outbreak, they declined by 4% to 7%, with an overall annual decline of about 5%.

Japanese and Korean Markets Benefit from Semiconductor Industry

Recently, Japanese and Korean stock markets have experienced increased volatility, especially Korea, where circuit breakers are frequently triggered—either on the downside or upside—by daily moves exceeding 5%.

Since the war began, the Nikkei 225 has fallen 9.31%, and the Korea Composite Stock Price Index (KOSPI) has dropped 7.41%. However, supported by strong semiconductor industry performance, both markets had accumulated significant gains before the conflict. Despite recent declines, they remain up for the year. Korea’s KOSPI has gained 37.18%, making it the best-performing index globally. The Nikkei 225 has increased by 6.03%, though the war has wiped out most of its gains for the year.

European Markets Suffer Larger Losses

Compared to China, the U.S., Japan, and Korea, European markets have been hit harder by the war. Since the conflict began, Germany’s DAX has fallen over 11%, France’s CAC 40 has declined more than 10%, and the UK’s FTSE 100 has dropped over 9%.

Among these, the UK has the highest energy self-sufficiency and has been less affected, but its FTSE 100 has still turned negative for the year, down 0.13%. France’s CAC 40 has nearly fallen 6%, and Germany’s DAX has declined over 8% for the full year.

More Dire in the Asia-Pacific Region

Apart from China, Japan, and Korea, other major Asia-Pacific markets have fared even worse. India, which had been on a strong upward trend, fell 8.64% in March alone, with a total decline of 11.97% for the year, making it the worst performer among major economies.

Vietnam’s economy has grown rapidly in recent years, and its stock market has performed well. However, due to energy shortages, recent volatility has increased. Since the war started, the VN30 Index has plummeted 12.79% over just 15 trading days, with a full-year decline of 11.46%.

The Australian stock market has fared somewhat better than India and Vietnam. The S&P/ASX 200 has fallen 8.37% since the war began, with a full-year decline of 3.28%.

In summary, although the A-share market has also been affected by the war and experienced some adjustments, its decline is relatively smaller compared to major global economies. Historically, once the impact of war subsides and markets stabilize, resilient sectors and stocks are likely to lead the recovery.