The world changed over the weekend.
The U.S. and Israel launched coordinated military strikes on Iran.
By Monday morning, March 2:
- The Strait of Hormuz, a chokepoint responsible for 20% of global oil consumption, was effectively shut down.
- Saudi Arabia was reportedly shooting down drones targeting oil refineries.
- QatarEnergy halted LNG production after an Iranian strike on its facility.
By every historical measure, this is the kind of geopolitical shock that sends markets into a frenzy.
It happened during the Gulf War in 1990. And it happened during Russia’s invasion of Ukraine in 2022.
I’ve traded every global conflict from the last 30 years. I know what the playbook looks like.
But I’m nervous right now.
(And not for the reason you’d expect…)
The Market’s Too Calm
As is the case when conflict rises in oil-rich areas of the world, oil prices spiked on Monday following the strikes in Iran.
Brent crude, the international benchmark for oil prices, surged 6% to $77 per barrel. That marks its highest level since the U.S. struck Iranian nuclear facilities last June.
The sector as a whole is trading higher.
And yet, with oil markets destabilizing and war breaking out overseas, the U.S. stock market barely blinked.
Look at the daily chart below of the S&P 500 ETF Trust (NYSE: SPY):
On Monday, March 2, the market opened the day lower but pushed higher into the close.
I expected a much more volatile move. Instead, we’re seeing sideways chop.
My Trading Plan
I’m following a few sectors right now.
- Oil and gas.
- Obviously affected by the war.
- Gold and silver.
- Surging again as people move toward safe-haven assets.
- U.S. tech.
- Could be a good hedge as people try to distance themselves from the war.
I’m also watching for the VIX to spike higher amid all this unrest.
But I’m trading with small position sizes until I find a strong setup.
The market is a little wishy-washy right now. I don’t want to waste my eggs on some half-baked pies.
The best advice I can give: study the past and wait for your opportunity.
Go back and look at what happened in the market during every major war in history.
Volatility hasn’t hit the fan yet… but when it does, you won’t have time to play catch-up.
Prepare today for tomorrow’s trades.
Stay Street Smart,
Jeff Zananiri
*Past performance does not indicate future results, Not typical.
