What Would Be the Market Impact of an Israeli or U.S. Strike on Iran?

Rising geopolitical tensions in the Middle East have reignited fears of a potential Israeli—or U.S.—military strike on Iran. With recent reports indicating Israel has informed U.S. officials it is fully prepared to launch an operation against Iran, investors must prepare for the potential economic fallout. In this analysis, we explore the sectors most vulnerable to such a development, as well as those that could benefit from an escalation in the region.

Market Shockwaves: A Catalyst for Global Volatility

Any military strike targeting Iran’s nuclear facilities or critical infrastructure would constitute a high-impact geopolitical event. The Strait of Hormuz—a key oil transit chokepoint—would immediately come under scrutiny, raising fears of supply disruptions. The broader financial markets would likely experience a volatility spike, with equity indices, currencies, and commodities reacting sharply.

Sectors Likely to Suffer the Most

Aviation and Tourism

The travel industry would be among the first casualties. Airline stocks, hotel chains, cruise lines, and travel booking platforms could face rapid declines as fears of regional conflict and airspace closures mount. Companies such as Delta Airlines, United Airlines, Marriott International, and Booking Holdings are likely to see pressure on their share prices.

Technology

Although not directly linked to regional security, global tech giants like Apple, Nvidia, and Intel could face short-term declines due to broader risk-off sentiment, fears of disrupted semiconductor supply chains, and declining consumer sentiment. Additionally, disruptions in oil markets may trigger inflationary concerns that weigh on tech valuations.

Emerging Markets

Emerging economies with high energy import needs—such as India, Turkey, and Egypt—could experience sharp capital outflows, local currency depreciation, and a surge in inflation. Equity indices in these regions are likely to underperform in the immediate aftermath of a strike.

Sectors Poised to Benefit

Energy: Oil and Gas Giants

The most immediate and pronounced beneficiary of a strike on Iran would be the energy sector. Iran’s geographic control over the Strait of Hormuz—through which about one-third of global seaborne oil passes—makes the risk of a supply disruption highly credible. Oil prices could soar, lifting the shares of energy titans such as ExxonMobil, Chevron, BP, Halliburton, and Schlumberger.

Natural gas players, including European LNG producers like TotalEnergies and Woodside Energy, may also benefit from increased demand as nations scramble for diversified energy sources.

Defense and Aerospace

Defense contractors typically outperform during periods of geopolitical stress. Companies such as Lockheed Martin, Northrop Grumman, Raytheon Technologies, General Dynamics, and Israel-based Elbit Systems would likely experience strong tailwinds. Rising global defense budgets and increased procurement activity across NATO and Middle Eastern nations would reinforce this rally.

Precious Metals: Gold and Silver

Investors often seek safe-haven assets during crises. Gold and silver tend to surge amid rising geopolitical risk, inflationary fears, and equity volatility. Exchange-traded funds like SPDR Gold Shares (GLD) and iShares Gold Trust (IAU), as well as mining companies like Barrick Gold and Newmont Corporation, could become investor favorites.

Broader Index Movements

A military strike could trigger immediate declines in major stock indices. The S&P 500 and Nasdaq would likely fall as risk aversion intensifies and oil price shocks rattle inflation expectations. European indices such as the DAX and CAC 40—already sensitive to energy imports—could also suffer.

The Israeli stock market may experience a mixed reaction. While geopolitical concerns would weigh on investor sentiment, strong representation of defense companies in the Tel Aviv 35 index could offer some downside protection.

Bond and Currency Market Reactions

In fixed-income markets, U.S. Treasury yields would likely decline as investors flee to safety, pushing up bond prices. The 10-year U.S. yield, a benchmark for global borrowing costs, could retreat sharply.

In currency markets, the U.S. dollar would likely strengthen due to its safe-haven status, while risk-sensitive currencies such as the Turkish lira, Indian rupee, and South African rand may weaken. The Israeli shekel could come under pressure depending on the perceived threat to domestic security and the scale of retaliation.

Is This a Temporary Shock or a Structural Shift?

If the strike is limited in scope and duration, financial markets could recover relatively quickly. However, if the event escalates into a broader regional conflict involving proxies or state actors, the result could be a sustained period of risk aversion, capital rotation, and elevated volatility. Investors would then need to reassess long-term asset allocations, particularly in commodities and defense.

Final Thoughts: How to Position for Maximum Resilience

In a world where geopolitical shocks can reverberate across markets within hours, investor positioning becomes paramount. Diversifying across commodities, defense equities, and inflation-hedging assets—while limiting exposure to emerging markets and cyclical sectors—can enhance portfolio resilience.