Stocks fall amid global selloff, but some on Wall Street are looking for assets that respond well to the war

• in Wells FargoOsung Kwon and his colleagues noted that in the months following the first and second Gulf Wars, the S&P 500 rose by 16% and 14%, respectively.
• It is not surprising that oil prices rose sharply after the start of the attack on Tehran. Up 13% at one point.
• Gold, investors’ favorite safe haven, also rose this morning to a new all-time high.
• The dollar rose about 1% against a standard basket of foreign currencies before paring some of its gains. Oil contracts are usually settled in dollars, so when the price of oil rises, demand for the US currency rises.
• Defense stocks performed well this morning. BAE Systems It rose by more than 6% in the UK and Germany market Rheinmetall AG stock rose 2% before lunch.

“Higher oil and gas prices are certain because the closure of the Strait of Hormuz threatens to disrupt 15% of global oil supplies and 20% of global (liquefied natural gas) supplies, with oil prices potentially exceeding $100 (per barrel) if tanker flows are not restored quickly,” Alan Gelder of research firm Wood Mackenzie said in an email.

At JPMorgan Chase, Joseph Lupton and his colleagues tried to gauge the severity of this round of conflict compared to previous events. “We cannot confidently chart the next military or political course, but we recognize that this event generates greater macroeconomic risks than recent military conflicts – the US intervention in Venezuela or the Israeli-Iranian conflict,” they told their clients. “With its potential to disrupt global energy markets and supply chains, it is most closely linked to the 2022 Russian invasion of Ukraine. It is also similar to the Russian invasion in that it is likely to have material and lasting political and economic consequences at the regional level.”

They agreed with Wood Mackenzie that the conflict could be serious enough to push oil prices above $100 a barrel. But in the short term, “our commodity strategists do not believe this scenario is likely to materialize.”

ING said almost the same thing.

Chart of trading economics

While stocks are falling globally today, Wells Fargo’s Kwon said traders should buy the dip.

The S&P 500 “was largely flat during the military buildup, then rose 16% during the first Gulf War and 14% in the first three months of the second Gulf War,” he told clients. “History also suggests buying geopolitical dips, usually recovering within a couple of weeks. Absent further escalation or oil shock (more below), we remain in an uptrend for stocks.”

But they said there may be pain before the gains. “Stock volatility during geopolitical events has largely followed the oil market, with historical oil shocks translating into a 16% decline in the S&P 500 on average. In the event of a prolonged Strait of Hormuz closure and an oil shock to over $100, we expect a worst-case scenario of $6,000 on the S&P 500.”

Here’s a quick look at the markets this morning before the opening bell in New York:

• Standard & Poor’s 500 Futures were down 1.22% this morning. The index closed down by 0.43% in its last session.
• Stokes Europe 600 It fell by 1.76% in early trading.
• FTSE 100 index in the United Kingdom It decreased by 0.63% in early trading.
• Japan’s Nikkei 225 Decreased by 1.35%.
• China CSI 300 It rose by 0.38%.
• South Korea Cosby Decreased by 1%.
• India Nifty 50 Decreased by 1.20%
• Bitcoin It was at $66.4k.