Iran live: Trump says Iran being ‘demolished’; Tehran keeps up Gulf attacks

Market structure: Immediate winners are US defense primes (LMT, NOC, RTX, GD) and energy producers (XOM, CVX, XLE) as demand for weapons, spare parts and fuel hedges raises pricing power; losers include global airlines (DAL, AAL, UAL), travel/leisure, and EM external-financed sovereigns (EEM) facing capital flight. Cross-asset mechanics: expect a VIX spike +200–400bps, USD appreciation (UUP) and Treasury safe‑haven rallies (TLT yields down 20–50bps) while front‑month WTI can gap +10–30% within days on Strait‑of‑Hormuz risk.

Risk assessment: Tail scenarios include closure of the Strait of Hormuz (WTI >$120–150), cyberattacks on energy/financial railroads, or rapid escalation to regional ground war; low‑probability but high‑impact within 30–90 days. Short‑term (days–weeks) volatility dominates liquidity and margin risk; medium term (3–12 months) drives capex reallocation into defense and strategic oil inventories; hidden dependencies include P&I insurance spikes, rerouted shipping costs and secondary sanctions hitting correspondent banking flows.

Trade implications: Favor asymmetric option structures and relative value: buy 6–12 week call spreads on top defense names and energy majors and long GLD/GDX as geopolitical hedges; use put spreads on big carriers to monetize elevated implied vol; rotate 2–5% portfolio weight from EM equity beta into TLT/GLD. Entry/exit should be trigger‑based (see decisions).

Contrarian angles: Consensus may overpay cyclic defense duration—if de‑escalation occurs within 60–90 days, oil and gold can mean‑revert 15–30% and defense multiples compress. Historical parallels (1990–1991 Gulf crisis) show sharp initial spikes then multi‑month normalization; prefer optioned exposure and thresholds to capture mean reversion rather than outright long duration exposure.