Thousands of missiles and drones: Iran's attacks on Gulf reveal its war effort

Market structure: Immediate winners are defense primes (Lockheed LMT, Raytheon RTX, Northrop NOC, General Dynamics GD) and energy producers (XOM, CVX) as risk premia on Gulf transit and military spending rise; losers include regional airlines (AAL, DAL), shipping/ports and Gulf sovereign assets. Expect short, sharp repricing: oil +3–10% and gold +2–5% in days if attacks persist; USD and USTs likely bid (yields -10–30bps) while credit spreads for EM and regional banks widen 20–75bps.

Risk assessment: Tail scenarios include direct hits to export infrastructure causing a 15–35% sustained oil shock, or U.S. military escalation triggering sanctions and global risk-off; probability low-medium but impact high. Time horizons split: immediate (days) — volatility spikes and flight-to-safety, short-term (weeks–months) — higher insurance/reinsurance pricing and shipping rerouting costs, long-term (quarters–years) — sustained defense budgets and permanent route/energy diversification.

Trade implications: Near-term tradeability favors tactical energy and defense exposure plus hedges: buy short-dated Brent call spreads or XLE exposure for a 1–3 month window; establish 6–12 month tactical longs in LMT/RTX/NOC sized 1–3% of portfolio; hedge equity beta with GLD or TLT allocation and VIX call spreads. Pair trades: long defense vs short airlines/EM travel names; size by risk budget and trim on 20% gains or 14-day de-escalation.

Contrarian angles: Consensus may overestimate persistent oil supply loss — interceptions imply many attacks fail to hit infrastructure, so initial oil spike could mean revert within 2–4 weeks; that creates a short-term fade opportunity (sell call spreads or buy put spreads on oil after a >10% jump). Also defense gains are front-loaded but require contract wins; favor names with visible backlog rather than headline rallies alone.