To The Moon

The Middle East is once again at the epicenter of global market volatility. Following Israel’s airstrikes on Iran, a ripple effect has been felt across energy and defense markets — with crude oil prices surging and defense contractors like Lockheed Martin (LMT) and RTX spiking in early trading.

RTX Corp (RTX)

Lockheed Martin (LMT)

Tensions in the region are not new, but the current flare-up is being closely watched for its potential to trigger broader instability. Iran had previously vowed to retaliate against any attacks, and if the conflict spills over into neighboring oil-rich nations, it could significantly disrupt global energy supplies.

Oil Stocks: Energy Prices Fueling a Comeback?

Oil prices are climbing in real time as the market prices in geopolitical risk. Higher oil prices typically translate into stronger revenues and cash flows for oil producers, especially those with high exposure to upstream (exploration and production) operations. Here's what's interesting:

• Geopolitical Premium: Whenever Middle East tensions rise, oil carries a “war risk premium.” This often results in short-term price spikes, even if physical supply hasn't yet been disrupted.

• Energy Security Narrative: The renewed conflict underscores the global importance of energy independence, which could drive more investment into fossil fuel infrastructure alongside renewables.

• Supply Fragility: The Strait of Hormuz, through which nearly some of the world’s oil passes, may become a strategic choke point in such conflicts. Any threat to this passage could send oil prices soaring.

My Position: Why I'm Holding Occidental (OXY)

I currently hold shares of Occidental Petroleum (OXY). Here's a closer look:

• Recent Price Action: OXY closed at $44.76 yesterday, and in overnight trading has increased around 4.25%, clearly in response to geopolitical tensions and rising crude prices.

• Valuation Gap: The stock remains well below its 52-week high of $64.76, despite posting solid financial performance and reducing debt.

• Warren Buffett’s Berkshire Hathaway holds over 25% of OXY, adding a layer of institutional confidence.

Occidental (OXY)

My strategy: I'm holding firm and won’t consider selling below $60, as I see further upside amid the sector rotation into energy and the strong fundamental tailwinds.

Defense Stocks: Profit in Uncertainty?

As military conflicts escalate, governments tend to ramp up defense budgets. That narrative favors defense contractors like:

• Lockheed Martin (LMT) – Maker of the F-35 fighter jets, missile defense systems.

• RTX – Key supplier of missile and radar systems, and a major player in NATO defense supply chains.

• Northrop Grumman (NOC) – Specializes in stealth technology and space systems.

Interesting dynamics:

• Global Military Spending may climb further as geopolitical risks grow.

• European and Middle Eastern countries could accelerate defense procurement to boost their deterrence posture.

• AI & Space Warfare: Modern defense isn’t just boots on the ground — these companies are increasingly involved in cyber defense, AI-based systems, and satellite warfare.

Historical Parallel: Oil + Conflict = Market Rotation?

Historically, oil and defense stocks tend to outperform during periods of international tension:

• 2014 Crimea Crisis: Similar spikes in oil and aerospace stocks occurred.

• Russia-Ukraine War (2022): Triggered shifts in European energy policy and lifted global oil majors for months.

These aren’t just knee-jerk market reactions — they often initiate sector rotations, where institutional investors move capital into “war hedge” assets like energy and defense.

Psychology of Crisis Investing: Calm Amid the Chaos

There’s no denying the emotional toll of investing in times like this. Uncertainty is high. News headlines are alarming. But seasoned investors understand:

• Volatility ≠ Risk: Price swings are not inherently dangerous — they often create opportunity.

• Market Overreactions: Geopolitical events frequently cause short-term overpricing or underpricing of risk.

• Follow the Fundamentals: Even during crises, companies with strong balance sheets and consistent cash flows often recover and outperform.

What I’m Watching Next

I’ll be closely monitoring the following over the next few days:

1. Oil Prices – If Brent crosses $90 or $100/barrel, it could signal structural supply fears.

2. Defense Stock Breakouts – Look for price action above recent resistance levels on strong volume.

3. Options Market – Spikes in implied volatility or unusual options flow could reveal institutional sentiment.

4. Middle East Headlines – Any escalation involving key oil-producing nations could trigger further surges in oil/defense equities.

5. Macro Backdrop – The Fed, inflation trends, and interest rates still matter — especially for capital-intensive energy companies.

Final Thoughts

The current environment is a sobering reminder of why energy and defense stocks remain essential components of a well-diversified portfolio. In times of geopolitical tension, these sectors often serve as a hedge — offering relative stability and outperformance when traditional growth sectors stumble.

That said, let me be clear: I don’t wish for this crisis to escalate. No investor should hope for conflict — the human and economic costs are far too high. But as participants in the market, it’s important to recognize how global events shape financial realities, and to prepare responsibly.

No one can predict how the situation will unfold. However, investors can position themselves to manage risk and potentially benefit from the broader ripple effects, whether through exposure to oil, defense, or other inflation-resilient assets.

If tensions do escalate further, the prices of oil and defense stocks may not just rise — they could surge.