Good morning, traders…
On Friday morning, news broke that Israel had bombed Iranian nuclear and missile facilities overnight:
According to multiple reports, some of Iran’s top military leaders were killed in the strike.
Then, on Friday afternoon, Iran responded by launching missiles into Israel:
That alone would be enough to send shockwaves through markets, but the bigger fear is what happens next…
Will there be civilian casualties? Will the U.S. get drawn in? Will oil supply lines be threatened?
We don’t know. But this is a major event that could spark a new volatility regime in the stock market.
Like I just said the other day, the market is constantly changing.
We need to think about any strategy shifts and updates to the watchlist that may be necessary with such a huge news story developing.
DISCLAIMER: We don’t root for bad events to make money. But as traders, we must understand the world as it is, not as we wish it to be…
War is ugly. It’s sad and unpredictable. I’m praying that it doesn’t get worse from here.
But as traders, we need to separate emotion from reality.
Here’s What’s Already Moving, What History Tells Us Might Happen Next, And The Stocks That Could Lead If The Conflict Escalates…
6 Sectors Affected By The News
First, the initial market reaction to the news.
The Dow Jones dropped 875 points while the SPY shed 0.6%. These are the biggest moves we’ve seen in weeks.
Oil prices surged, jumping as much as 14% in early trading. West Texas Intermediate (Brent crude) pushed near $77 per barrel.
Oil acts as a pressure valve in Middle East conflicts. When the region gets unstable, oil prices almost always rise.
Let’s take a look at recent history:
Operation Desert Storm (1990–1991)
- Iraq invaded Kuwait, both major oil producers, triggering fears of a global oil shortage.
- Oil prices doubled from $20 to $40 per barrel almost overnight.
- Once the U.S.-led coalition pushed Iraq out and the conflict stabilized, prices quickly fell.
- The market’s reaction reflected fear, followed by a sharp reversal as uncertainty eased.
Post-9/11 War in Afghanistan (2001)
- Afghanistan itself isn’t oil-rich, but its location in the Middle East triggered broader concerns.
- Traders worried the war might spread to oil-producing neighbors or disrupt supply chains.
- Oil prices rose in anticipation of potential instability (even though no direct supply was cut).
- This was another example of how markets often price in fear of the unknown.
Invasion of Iraq (2003)
- Iraq is a top OPEC oil producer, so the invasion rattled global energy markets.
- Oil jumped from $25 to over $35 a barrel as fears of disrupted supply took hold.
- Even after the conflict began, prices stayed elevated due to long-term instability.
But the bigger issue is how long the price spike lasts. A quick spike and fade is one thing. A longer disruption could drive fuel prices higher on a global scale, reigniting inflation concerns.
Emerging markets could also suffer, particularly those that depend on importing oil. Think China, India, South Korea, and Japan.
Higher fuel costs hit these economies harder, while currency volatility and capital flight tend to follow.
Defense stocks jumped across the board. This is typical when geopolitical tensions rise.
The same thing happened during the first Gulf War, the war in Afghanistan, the war in Iraq, and the early stages of Russia’s invasion of Ukraine.
Stocks like Lockheed Martin Corporation (NYSE: LMT), Raytheon Technologies Corporation (NYSE: RTX), and Northrop Grumman Corporation (NYSE: NOC) benefit from the expectation that defense budgets will get a boost.
Gold and Treasuries both rose, more classic signs of risk-off behavior. Bad news causes money to move into traditionally safer assets.
Travel stocks and airlines got hit hard, especially carriers with international exposure. Delta Air Lines, Inc. (NYSE: DAL) and United Airlines Holdings, Inc. (NASDAQ: UAL) are likely to feel more pressure if these tensions escalate further.
Any time conflict breaks out near a major air corridor, flights get suspended or rerouted. That means higher costs, lower demand, and nervous investors.
We’re not there yet. But as usual, the market is preparing for the worst.
What This Means for Your Trading
So, what does this mean for your trading? How should you adjust your strategy to fit the moment?
Keep a close eye on oil, precious metals, Treasuries, and defense stocks. If this conflict escalates further, these sectors are in for huge moves.
But don’t make any trades in these categories … yet.
If recent history is any guide, the initial reaction is often overdone. The market tends to price in worst-case scenarios quickly, usually too quickly.
There’s almost always a knee-jerk move down, followed by a reversion to the mean.
After that initial flush, stocks usually stabilize (or even bounce back higher) if the fear subsides.
During the Cuban Missile Crisis, the Dow fell sharply, then rallied once it became clear war was off the table.
During the Gulf War, markets initially dropped, but recovered once the operation was seen as quick and effective.
Even during World War II, the U.S. stock market went higher due to the Industrial Revolution that came with it.
Here’s what we can expect to happen this time:
- Defense and energy stocks are strong for a reason. Momentum may continue if tensions escalate.
- Gold and other hedges can provide stability during choppy sessions.
- High-growth tech names will be under pressure while the VIX is high.
- Travel and emerging markets may continue to see outflows if this develops into a prolonged conflict.
Be safe out there,
Ben Sturgill
P.S. You don’t need a fancy setup.
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You don’t need to spend all day watching charts.
And you don’t need a lot of money.
All you need is a working phone, internet connection, and a trading account…
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*Past performance does not indicate future results
