US experts say American strikes on Iran may amount to war crimes

Over 100 U.S. international law experts signed an open letter warning recent American strikes on Iran may amount to war crimes after President Trump reiterated threats to target Iran’s power and desalination plants and said he would 'hit them extremely hard' and 'bring them back to the Stone Ages.' The letter cites inflammatory comments by senior officials and highlights a Feb. 28 strike on an Iranian girls’ school that the Iranian Red Crescent says killed 175 people and which U.S. investigators have elevated after finding U.S. forces likely responsible; joint U.S.-Israeli strikes and Iranian retaliations have reportedly killed thousands and displaced millions. Implication for portfolios: elevated geopolitical and energy-infrastructure risk that could increase oil volatility and drive risk-off flows across equities — review exposure to energy, defense, and highly levered cyclical assets.

Analysis

Thin liquidity and a risk-off consensus amplify idiosyncratic moves: in shortened sessions realized intraday volatility and bid-ask spreads typically widen 10–30%, meaning delta- and flow-driven instruments (options, single-stock futures) will report outsized fees and temporary price dislocations. Exchanges can see a near-term revenue lift from option and FX flow, but that benefit is lumpy and vulnerable to headline-driven volume drops; any legal/regulatory headline would compress multiples quickly because revenue is concentrated and forward visibility falls.

Geopolitical risk is re-pricing two channels: (1) durable defense/capital spending optionality and (2) energy/insurance cost premia on traded commodities and shipping. Defense primes and midstream operators with take-or-pay or fixed-fee contracts capture cash-flow stability and are first-order beneficiaries; travel, commercial aerospace, and leisure-exposed cyclicals are the obvious losers and will lead earnings revisions in the 1–3 quarter window.

AI compute demand remains a countervailing secular force — system integrators and software stacks that accelerate deployment (the likes of converged hardware and targeted ad/engagement platforms) can see order acceleration even during macro risk-off, creating a convexity trade: stable revenue growth but volatile multiples. The primary reversal risk is a liquidity shock or capex pause that can knock 10–30% off equity value in 1–3 months even if fundamentals are intact.

Watch three catalysts: corporate order-job flows and backlog commentary in the next 4–12 weeks, realized oil/shipping insurance cost moves over the next 2 months, and any regulatory/legal clarifications that affect exchange/operator business models. The asymmetric playbook is to size into secular winners while shorting transient cyclical exposures and carrying tail hedges that pay if volatility spikes further within 1–3 months.

Key Decisions for Investors

• Long SMCI via a 6–12 month call spread (size 0.75–1% NAV): buy-dated calls and finance with nearer-term calls to keep cost low. Rationale: secular AI capex and urgent on-prem upgrades; target asymmetric payoff of 2.5–4x if hardware orders reaccelerate. Stop: cut premium at -40% and re-evaluate on order-guide misses.
• Long APP via Jan 2027 LEAPs (size 0.5–0.75% NAV): exposure to ad/engagement monetization uplift and AI-targeted yield improvements. Risk/reward: pay modest premium for 2–3x upside if CPMs and monetization metrics re-accelerate; hedge by selling 9–12 month out-of-the-money calls to fund 20–30% of premium.
• Pair trade for 3–9 months: Long defense prime (e.g., LMT/GD) 1–2% NAV vs short commercial aerospace (e.g., BA) 1–2% NAV. Rationale: re-rating for defense demand vs booking/cashflow hit for commercial aerospace; expected asymmetric spread expansion of 15–25% in 3–6 months if supply-chain/orders diverge.
• Index tail hedge for 1–3 months: buy concentrated SPX protection (ATM or 5% OTM puts) or VIX call spreads sized to cap portfolio drawdown at 5–7%. Rationale: protect against headline-driven spike in realized volatility; cost financed by trimming cyclicals/leisure exposure. Exit: collapse hedge once realized vol falls below 18–20% and headlines stabilize.