China’s stimulus bet is colliding with Hormuz tension — and bond traders are picking sides

Beijing’s latest stimulus package delivered exactly what markets wanted: concrete numbers, real money, and a timeline that doesn’t stretch into 2027. The National Development and Reform Commission announced 2.3 trillion yuan in infrastructure spending over 18 months, with 40% earmarked for green energy projects that directly compete with US solar and wind capacity. That’s roughly $320 billion flowing into sectors where profit margins have been under pressure since 2024.

Here’s what makes this interesting: US bond traders aren’t celebrating China’s economic revival. The 10-year Treasury is holding steady at 4.25% despite equity futures climbing on the China news. That disconnect suggests fixed income markets are pricing in something equity markets are ignoring — either higher US inflation from Chinese demand recovery, or geopolitical risk premiums from the Strait of Hormuz situation.

The Hormuz tension is the wildcard nobody’s properly pricing. Iran’s latest naval exercises aren’t just saber-rattling — they’re happening while China ramps up energy imports to fuel this stimulus. About 20% of global oil flows through that 21-mile chokepoint, and China imports roughly 75% of its crude through the strait. If Beijing is serious about hitting these infrastructure targets, they need uninterrupted energy flows right when tensions are escalating.