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Newsquawk Analysis: US equity price action in the midst of the Middle East conflict

Newsquawk Staff ·

  • Cruise liners (NCLH, RCL, CCL), Airliners (UAL, AAL, JBLU, DAL), and Lodging (MAR, BKNG) stocks all heavily sold and under pressure as strikes across the Middle East has disrupted major Middle Eastern airports, including Dubai, grounding flights and weighing on broader sentiment.
  • Drone makers (AVAV, KTOS, ONDS, RCAT, UMAC, DPRO) rally due to geopolitical escalation, which have increased demand for military and surveillance tech. The conflict raises concerns about airspace security and logistics, making unmanned systems more valuable for both military and commercial applications.
  • Defense names (LMT, LHX, RTX, GD) gain given the Middle East conflict as it increases the need for defence. Stifel recommends (CACI, KTOS, ONDS, LASR, PSN) as they think the war with Iran will further boost defence. Adds defence spending was already set to surge in 2026 and a protracted war with Iran will make the spending more urgent and less controversial.
  • Energy stocks (OXY, XOM, CVX) see a strong rally given the surge in oil prices.
  • Fertliser names (CF, NTR, MOS) higher. RBC says Iran conflict likely lifts nitrogen. RBC expects rising conflict in Iran/Middle East remains a focal point for nitrogen as the Country/region accounts for ~10%/~25% of global urea exports, with nitrogen equities potentially bid up this week on US/Israel missile strikes on Iran. Adds nitrogen business had not seen much disruption in the Middle East, with sales continuing to be made as normal, including ~500Kt volumes from the region being committed to the recent India tender, while prices had yet to price in much risk premium from potential conflict. However, with the weekend's strikes on Iran and shipping through the Straight of Hormuz impacted, supply from the region may be disrupted and could lift global nitrogen prices.
  • Shipping stocks (FRO, DHT) strengthen and are in focus as Iran appears to have effectively closed the Strait of Hormuz in response to US and Israeli attacks. Barron’s notes, while that could cause oil prices to spike, it could be good news for shipping stocks, incl. FRO & DHT. Barron’s adds other tankers/shipping stocks have already rallied this year including NAT, STNG and TNK to reflect the possibility of this outcome.
  • Waste stocks (WM, CLH, WCN) – Rising oil prices could be a headwind for waste stocks. Citi evaluate waste stock performance around prior periods of sharp, sudden rising oil prices and pullbacks in the broader market. Adds, generally, rising oil prices could be a headwind for waste, as they could symbolize stronger underlying macro activity and shifting investor preference towards cyclicals. Citi is sticking with WM as its top pick on reasonable valuation, and in the event of sustained higher oil prices, Citi believes it's possible Neutral-rated CLH & WCN could outperform on higher relative exposure to oil.
  • JPMorgan on Stocks - Tells clients to use geopolitical weakness to add, as fundamentals are constructive; the bank expects near-term risk-off after geopolitical escalation but sees weakness as a buying opportunity over 3-, 6-, and 12-months. JPM says that fundamentals are supportive, activity is resilient, consumer wealth effect is positive, and corporate capex is backed by robust earnings. Its analysts note that Mag-7 and anti-AI groups have derated sharply, with relative P/E near 10-year lows and record lows respectively, adding that while both may lag, absolute downside is seen as more limited. The bank reiterates its preference for leadership broadening towards Value, small caps, International and EM over DM; cautions on Software, Business Services and Media; it also flags mining rally as maturing.
  • Morgan Stanley on Stocks - Strategists see the eruption of conflict in Iran and the Middle East as unlikely to derail their bullish view on US stocks, barring a sharp and sustained surge in oil prices… “Unless oil prices spike in a historically significant manner and remain elevated, recent events are unlikely to change our bullish view on US equities over the next 6-12 months”. MS adds, historically, most geopolitical risk events don't lead to sustained sell-offs. Oil prices will likely determine if volatility rises. Healthcare is attractive amid fundamental tailwinds. Price action tied to AI disruption risk presents opportunities in well-positioned incumbents and AI adopters.

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