Since September, the global energy crisis has continued to ferment: natural gas energy shortages in Europe and America have led to skyrocketing prices for NYMEX natural gas futures; International crude oil supply is also facing tension, with WTI crude oil prices reaching a 7-year high; China's domestic coal resource inventory is approaching a historical low, the price of thermal coal remains high, and the price of bulk commodities has almost risen across the board

Against the backdrop of energy shortages across the board, the volatility of global capital markets has also significantly increased: major stock indices such as the S&P 500 and FTSE 100 have also shifted from unilateral gains to broad fluctuations or even declines. At this point, a question arises: how did the current global energy crisis, which has such a huge impact, come about?

Firstly, from the supply side perspective. In 2020, the outbreak of the epidemic hit the global energy supply with large-scale industrial stagnation. Traditional energy extraction industries such as natural gas and crude oil experienced a wave of corporate bankruptcy, and production capacity fell to freezing point.

On the other hand, major global economies have accelerated the promotion of "carbon neutrality" policies, accelerating the transition process of renewable energy. However, during the year, extreme weather occurred frequently, and the La Ni ñ a phenomenon continued to ferment. Affected by weather conditions such as ultra-high pressure and extreme drought worldwide, green energy production was severely affected, leading to a shift in supply pressure towards traditional energy and accelerating supply shortages.

Secondly, from the demand side perspective. In 2021, as the global economy recovers and recovers, the resumption of production and work at home and abroad accelerates, and demand orders flood in. Without a complete recovery of the supply side, the demand gap increases, and the original global supply and demand basic balance is misaligned. Meanwhile, as winter approaches, seasonal activities such as heating will further expand the demand for traditional energy sources such as coal, gas, and oil.

Overall, the essence of this round of global energy crisis is that the demand side is recovering faster than the supply side after the epidemic, coupled with the impact of extreme weather and the objective contraction of the production side caused by energy-saving transformation. Inventory is already at a low level, leading to an increase in the prices of related commodities. Moreover, the combination of low inventory and expectations of a cold winter has to some extent exacerbated market concerns about energy shortages.

The stock exchange dual market may usher in a market trend

The global energy crisis will also indirectly affect the stock market. Firstly, energy prices have skyrocketed across the board, significantly pushing up inflationary pressures in major economies. Mainstream central banks around the world have begun to accelerate the normalization of monetary policy, and several central banks, including the Federal Reserve, have also begun to release turning signals. The tightening of policies is theoretically not conducive to the upward pace of the stock market.

Secondly, energy prices drive synchronous increases in electricity prices, leading to higher production costs and narrower profits for upstream enterprises. In Q4, expected revenue will face challenges, which is not conducive to the trend of individual stocks in related industries; If the situation of limited production and electricity occurs, the production capacity of upstream enterprises will decrease, the supply of raw materials will decrease, and prices will increase, which will also have an impact on the product prices of middle and downstream enterprises.

In addition, energy shortages may boost the US dollar. Based on the current severe situation, the market has raised some concerns about the energy crisis, and safe haven demand may once again boost the US dollar. At the same time, coupled with weak global economic growth forecasts and rising inflation, the US dollar will become a more attractive bet compared to high beta currencies sensitive to economic growth and other defensive currencies such as the Japanese yen.

At a time when the energy crisis is sweeping the world, all assets are also facing market opportunities. Moreover, HYCM also has an opportunity: HYCM provides "gold" in autumn, 10% of the transaction gift is free, and can receive up to $5000, with an exclusive time limit in October.

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