Wars are brutal. The human costs have no justification. Supply chain disruptions aren’t hearty. They hit households hard. A spike in the inflation rate is concerning. It makes wallets across income ladders bleed.
But then these unjustified events have strong economic implications that experienced and shrewd stock investors and traders strongly look out for. I don’t know if you belong in that class. Even if you don’t fall into the description, it makes sense to know a thing or two about trade patterns attached to unfolding global events.
Historical patterns show that geopolitical tensions drive up uncertainty, which drives up prices of commodities ranging from oil to gold, impacts the money market and dictates preferred purchases. Curious investors make calculated moves. At such a time, your action or inaction depends on where you sit.
Let me share an insight. According to BusinessDay analysis, “During the Vietnam War, defence contractors saw multi-decade growth. During the first Gulf War, oil prices spiked 130% before crashing, and traders who understood the pattern made fortunes on both the way up and the way down. During the Russian invasion of Ukraine in 2022, European natural gas ETFs returned over 200% in twelve months.”
It shared a brilliant excerpt on the same pattern playing out since the US and Iran initiated the most recent unsettling global event, “from January 1 to March 9 — roughly ten weeks — Brent crude went from approximately $68 to over $100 per barrel: a 47% move for anyone holding energy positions.”
“Defence ETFs tracking companies like Lockheed Martin and Northrop Grumman saw double-digit gains. Gold, already on a multi-year bull run, pushed toward records that analysts at J.P. Morgan now forecast at $6,300 by year-end. The Strait of Hormuz, through which 20% of the world’s oil flows, was effectively closed at the conflict’s peak. Then on April 8, Pakistan brokered a two-week ceasefire. Oil dropped 14% in a single session. A relief rally, carefully hedged.”
The ordinary news readers skim through details of global tensions casually. Commuters see rising transport costs. Households think about mounting bills. These are no doubt valid reactions. None of us likes that news. Yet, the investors make a move, noting premium returns that often underline the tensions. These investors know that market perception of risks and understanding where to throw the dice can swing the route to wealth at this time.
Precisely, money is never in short supply. It is a question of where money is headed. It is a question of who is taking the largest shares. It is a question of who understands the crisis playbook and frameworks that milk geopolitical shocks.
The chokepoint for the ongoing geopolitical shock is the Strait of Hormuz, through which 20% of global oil is freighted. It is important to know which assets will/ are benefitting from the shocks. Based on historical data, notably, oil, whose supply is being threatened, comes first. Gold, generally seen as a haven, is next. Defence stocks, as governments spend more to protect their domain, are critical. The US dollar, seen as the world’s reserve currency, comes in too.
Highly rated Morgan Stanley market data proved that stocks historically posted double-digit gains during the recent Gulf Wars. However, it is wise to be cautious. Geopolitical tensions won’t last forever. At some points, negotiations would click. A ceasefire deal would be agreed. The war would eventually come to an end.
Taking the preceding into consideration, Oxford Economics advised anyone seeking to profit as an investor in the ongoing crisis: “Sell any extreme moves; these will fade.”
In sum, if you have an appetite for stocks at this time and are revving for what could be had, you can leverage tools such as Exness, OctaFX, HFM, Bamboo, and Chaka for proper guidance.
