The market is breathing a sigh of relief on the war in Iran today and it’s leading to some big moves. The most-consequential one is in oil, with WTI crude down $4.50 to $80.38 after briefly touching below $80.
If those levels hold, it means we’re past the worst of the inflationary shock and will start to see negative m/m readings, cutting into the +4% headline inflation that’s squeezing consumers now.
Here are four things that are benefiting:
#1 Airline stocks
One of the biggest losers from the war were airlines as they were hit with higher oil prices and jet fuel prices that spiked particularly high on the loss of Middle Eastern refining. The JETS airline ETF is 4% and stands to be a main beneficiary as it round trips the war decline. Moreover, airlines said that demand was resilient despite +20% fare increases to cover oil prices. That suggests strong underlying demand for flying in particular.
#2 Cruise ships
Another travel sector that’s strong today is cruise lines, with Carnival up 6%. I highlighted that name as a potential winner of a peace a few times during the war and it’s performed well as it wasn’t exposed to as much fuel risk as airlines but was battered just as badly (initially). Carnival was resilient lately and is strong today.
#3 Gold
Gold is a big winner today and gold miners are particularly strong with many up by more than 10% today. Gold looked like it was breaking down last week as the bulls threw in the towel at the worst possible time, perhaps due to an over-reliance on technicals. Gold is a clear winner on the war ending as emerging market economies will get back to building gold reserves that were at risk due to current account deficits on the oil price spike. I would like to see gold get back above $4500 to restart the momentum trade but up $142 to $4361 today is a great start.
#4 The euro
The euro is up 48 pips today and I think there’s more to come if the peace lasts. The eurozone economy is particularly exposed to energy flows via oil and LNG. A retreat in crude is a strong catalyst for the euro and it’s one of the most-straight forward peace trades out there
