Markets are reacting in all the usual ways one would expect following the conflict in Iran. Stocks are sliding, the dollar is gaining, while oil has surged 8% to over $72 per barrel and gold just rose above $5,400 an ounce. How long those trades play out depends on how long the campaign in the Middle East will last and whether tensions will escalate in the Strait of Hormuz and to areas far beyond. Temporary surge or $100 oil?
What happened? On Saturday morning, Iranian Supreme Leader Ayatollah Khamenei and many top regime leaders were killed in strikes on Tehran. A joint U.S.-Israel campaign was launched after determining that diplomatic efforts toward having the Islamic Republic give up its nuclear ambitions and end its regional terror network hit a dead end. There were also fears over its ballistic missile program that was increasing in scope and size – with no safeguards for a regime whose slogans are “Death To America” and “Death To Israel” – and mows down its citizens by the thousands for protesting economic mismanagement and human rights. Khamenei betting frenzy triggers backlash, scrutiny of prediction markets
After losing its top command structure, Iran has been lashing out all over the region. It continues to launch volleys of ballistic missiles toward civilian and military locations in Israel, as well as the UAE, Kuwait, Qatar, and Bahrain. Overnight, Lebanon’s Hezbollah jumped into the fighting, while Iran extended its strikes to European soil and Saudi Arabia’s Ras Tanura, which is one of the biggest oil ports in the world. See where Iran ranks in OPEC oil production
Outlook: In the long run, investors will reward the nations and companies capable of not only defending their interests, but also providing security for others. That includes regions that will be ripe for investment, as well as corporations involved in defense contracting, cyber, space, and battlefield management, or firms involved in energy independence and critical minerals. In the short term, safe havens are in strong demand, like gold and the dollar, as well as key resources like crude, until a clearer picture emerges about the investing landscape. Quant check: Defense stocks volatile on rising U.S.-Iran tensions