๐ฅ Oil & Defense Spike on Middle-East Tensions โ Trade the Shock or Fade the Fear?
Israel's latest strikes on Iran sent WTI up 6 % overnight, while defense contractors $RTX and $LMT jumped ~10 %. History says geopolitical rallies can be fierceโbut short-livedโunless supply actually goes offline.
๐ Why Oil Could Keep Running
Risk of Strait of Hormuz disruption โ 1โ5 of global crude flows through this 21-mile bottleneck.
OPEC spare capacity already tight โ Saudi output cuts leave less buffer if Iranian barrels vanish.
Inventories below 5-yr avg โ OECD crude stocks have trended down since Q4.
๐ Why the Rally Might Stall
Strategic Petroleum Reserve draws โ The U.S. still has room to release barrels to cap prices.
Demand soft patch โ Chinaโs PMI contraction and tepid diesel cracks hint at cooling consumption.
Paper squeeze, not physical shortage โ Last weekโs open-interest spike shows funds adding hedges faster than refiners buying cargoes.
๐ซ Defense Names on My Radar
$LMT โ 40 % backlog in missiles & fire-control; low float means any order chatter squeezes.
$RTX โ Patriot system demand > capacity; every 1 Patriot battery (~$1 bn) = ~1 % revenue.
$NOC โ Stealth bomber and missile defense exposure; breaks $500 could target $530.
๐ Trade Ideas
Crude momentum: Long Jul WTI futures (CLN) with stop at $76; first target $88 where SPR jawboning likely kicks in.
Oil-beta equities: Buy $XOM on dips to $112; optionality on Guyana output + 3.3 % yield.
Defense swing: Sell Jun-end $LMT 440 puts โ collect premium while positioning to own below 200-DMA.
Hedge: Short $Delta Air Lines(DAL)$ (airlines) above $52 to offset crude long; fuel costs ~25 % of opex.
๐ My Position
Added half-size long Brent Aug 85 calls yesterday.
Watching $VanEck Oil Services ETF(OIH)$ (oil-service ETF) for break above 330 to scale into rigs (SLB, HAL).
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