Eugene Investment & Securities said on the 16th that, looking back at the past Russia-Ukraine war, even after a war ends, it may take longer than expected for the surging oil price to fall.
Recently, international oil prices have risen sharply on concerns that the Middle East crisis could drag on. Brent and WTI crude each neared the $100 range, and on the 9th, the intraday price swing exceeded $38.
Heo Jae-hwan, a researcher at Eugene Investment & Securities, said, "It was expected that the war would not last more than a month, but Israel is instead expanding its defense war expectations," and added, "As with the 2022 Russia-Ukraine war, the longer the war lasts, the more we need to be prepared for the possibility that it could take time for oil prices to return to the low-$60 range seen at the start of the year."
Looking at the relationship between oil prices and operating profit in major domestic industries during the 2021–2022 Russia-Ukraine war, operating profit in sectors such as transportation, energy, trading/capital goods, consumer staples, and IT hardware continued to increase during an oil price uptrend.
In terms of profit sensitivity to a $1 change in oil prices, the energy, trading/capital goods, and transportation sectors were sensitive. Semiconductors were solid through the first half of 2022, but operating profit fell sharply in the oil price downtrend after the second half.
During an oil price uptrend, utilities, displays, construction, securities, and chemicals were sluggish due to rising costs. Eugene Investment & Securities viewed these sectors as likely to benefit the most in an oil price downtrend.
Heo said, "When oil price anxiety was high in the 2022 stock market, telecom, transportation, utilities, and construction were strong," and explained, "At the time, earnings in utilities and construction were not good, but stock prices held up because profit volatility was relatively low."
However, during the Russia-Ukraine war, there was the difference that post-pandemic revenge spending, labor shortages, and the U.S. Federal Reserve (Fed) tightening had a strong impact.
Heo said, "Fortunately, in the recent oil price uptrend, the semiconductor sector's pricing power has not shown adverse effects, so the downside risk in the current stock market is not high."
He added, "Even after the war, oil prices may fall more slowly than expected, so it is necessary to increase the weights of energy, trading/capital goods, transportation, IT hardware, and telecom," and said, "Conversely, if oil price anxiety stops, it is better to increase the weights of utilities, construction, securities, and chemicals."