International Geopolitical Situation
Israel - Iran Conflict
-
Market Reaction: The market's concern about the Israel - Iran war escalating into a larger-scale conflict has somewhat subsided. The US dollar and stock markets have rebounded slightly, and although oil prices have fallen, it's only by about one dollar. The market is still focused on the impact of the conflict on bulk assets.
-
Escalation of the Conflict: On Monday, Israel shot down an Iranian F14 fighter jet at Tehran Airport and bombed the Iranian state media building. This also led to the suspension of at least two out of three operating uranium enrichment plants in Iran. Israeli Prime Minister Netanyahu stated that the air - strike plan is likely to continue to ensure that Iran has no possibility of a nuclear program.
-
Scale of the Conflict: The conflict has evolved from border skirmishes to cross - city missile wars. Israel has intensively bombed multiple Iranian cities, including Tehran, Isfahan, Natanz, Shiraz, and Mashhad. In response, Iran has launched significant missile retaliation against Israel, targeting major cities such as Tel Aviv, Haifa, and Bat Yam.
-
US Military Preparedness: From the global aircraft map, the US Air Force has dispatched multiple KC - 46A and KC - 135 aerial refueling aircraft from bases in Kansas, Oklahoma, Pittsburgh, and Florida. The aircraft are concentrated over the UK, Belgium, Luxembourg, and Spain, indicating a state of preparedness.
-
Impact on Oil Prices: According to a JPMorgan report, the escalation of the Middle East situation may trigger an exponential increase in oil prices. The worst-case scenario is the blockade of the Strait of Hormuz. However, as long as the Strait of Hormuz is not blocked, the geopolitical tension will gradually subside based on past experience.
Potential Scenarios
-
60% Probability - Limited Tension: Oil prices will remain between $70 - $80 per barrel. The absolute high point of oil prices in the short term has been reached. Gold, Bitcoin, and network security stocks, as well as defense - related stocks, will have significant buying support.
-
25% Probability - Escalation: Iran will take more powerful retaliatory measures, including missile attacks, drone fleets, and the most serious being the blockade of the Strait of Hormuz. If this happens, oil prices will soar above $120 per barrel, and the US will need to intervene directly.
-
Low Probability - Diplomatic Miracle: If Trump can bring both sides back to the negotiating table and a peace agreement is reached, it will lead to a significant increase in market buying.
Iran's Military Capabilities
- According to the International Institute for Strategic Studies (IISS), Iran's air defense forces still have 410 sets of surface-to-air missile launch systems that have not been destroyed, about 16 sets of the Great Wall system, 180 self-propelled anti-aircraft guns, over 940 towed anti-aircraft guns, and an unknown number of man-portable air defense systems.
Trump's Stance
- Trump, in his second term, vowed to end wars and restructure the world order as a peacemaker. However, five months into his term, he is still facing the stalemate in the Russia - Ukraine war, the breakdown of the Gaza cease - fire, and the escalation of the Israel - Iran conflict. The conflict has also begun to split the political base within the White House. Trump initially distanced himself from the attack but later positively evaluated it and demanded that Iran enter the negotiation table.
North Korea Situation
- Although South Korean President Lee Jae - myung has communicated with North Korean leader Kim Jong - un, tried to ease tensions, and called for an end to the floating of anti - North Korean regime leaflets and materials, Kim Jong - un's attitude remains firm. The construction of a new uranium enrichment facility at the Yongbyon Nuclear Scientific Research Center has accelerated. The number of nuclear bombs that North Korea can manufacture has increased from 60 last year to 90. Trump has expressed his willingness to engage in personal diplomacy with Kim Jong - un, but North Korea has not made many statements.
Economic and Trade Situation
Japan - US Trade Negotiations
- The sixth round of Japan - US trade negotiations is still ongoing. Japan's Minister of Economic Revitalization, Sukeroku Fumio, mentioned that there are significant difficulties in the negotiation of automobile tariffs. The two sides will continue to communicate, but the negotiation seems to be stuck. Japanese politician Ishiba Shigeru has been criticized for being too soft in dealing with the US, especially in areas such as political - fund reform and the Japan - US Status of Forces Agreement. According to the research of the Oxford Economics team, if Japan unilaterally lifts all high tariffs on the US, the boost to economic growth will be very limited.
South Korea - US Trade Negotiations
- South Korea has established a new task force led by the new Minister of Trade, Yoo Han - joo, to cut tariffs on South Korean goods in the US. The task force is formulating a package agreement to promote the US to significantly reduce tariffs on South Korean goods. South Korea hopes to include automobile tariffs in the negotiation, but the US does not think that automobiles should be mixed with other tariffs in the negotiation.
Vietnam - US Trade Negotiations
- The US - Vietnam trade negotiation seems to have reached a framework agreement. Vietnam's tariff rate is likely to be significantly reduced. Vietnam hopes to reduce the tariff rate to 20% - 25% and promises to strengthen the control of Chinese goods bypassing and increase procurement from the US in exchange for the US relaxing tariffs and trade barriers.
Taiwan's Situation
- Taiwan has already expanded investment in the US. The exchange rate of the New Taiwan dollar has appreciated significantly, which has significantly reduced Taiwan's trade surplus with the US. Taiwan also needs to deal with the issue of avoiding the "washing of production sites" of third-party countries like Vietnam.
Technological and Regulatory Situation
China's Circumvention of US Sanctions
- Chinese enterprises are using various methods to circumvent US sanctions on advanced chips. For example, some Chinese engineers use the method of carrying hard drives to transfer data from Beijing to Kuala Lumpur, then train in Singapore using NVIDIA AI servers, and finally bring the trained data back to China. This shows the loopholes in the implementation of the US blockade policy.
Taiwan's Export Control
- The Taiwan Economic Affairs Department has issued a new entity management list, including Huawei and SMIC in China, which are involved in weapons proliferation activities, into the export control list. It also warns Taiwanese companies to be careful about their export items to avoid being involved in geopolitical storms.
Stock Market Performance
-
US Stock Market: The Dow Jones Industrial Average rose 317 points, or 0.75%, to 42,515 points; the S&P 500 Index rose 56 points, or 0.94%, to 6,033 points; the Nasdaq Composite Index rose 294 points, or 1.52%, to 19,701 points; the Philadelphia Semiconductor Index rose 155 points, or 3.03%, to 5,267 points.
-
Taiwan Stock Market: The Taiwan Stock Exchange weighted index rose 237 points to 22,287 points.
Labor Shortage Problem
US Labor Shortage
- The US government's deportation of illegal immigrants has led to a shortage of labor supply. In industries such as horticultural services, private household services, construction, and agricultural production, the proportion of illegal immigrants is very high. Large-scale deportation of illegal immigrants will significantly compress the profits of small and medium-sized enterprises.
Taiwan Labor Shortage
- Taiwan is also facing a serious labor shortage problem. The proportion of the working-age population (15 - 64 years old) has decreased. Industries such as wholesale and retail, accommodation and catering, electronic components, and construction are in short supply of labor. The high - age population in Taiwan has returned to the labor market, which has led to some positive changes, such as the improvement of the social welfare system. However, it also brings some problems, such as the need to improve public toilets to meet the needs of the elderly and the disabled.
Future Outlook
- In the next three weeks, the market will focus on the US - Taiwan trade negotiations and the Federal Open Market Committee (FOMC) meeting. The market is also looking forward to whether the Central Bank of Taiwan will release some dovish statements to ease the pressure on the real estate market.
{# 
{# 
{# 
{# 
{#