Iran latest: US commander declares ‘We have just begun’ as 4 dead soldiers named

Market structure: Defence primes (LMT, RTX) and munitions/systems suppliers are clear beneficiaries as US/UK gear-up and a White House meeting signal accelerated orders; energy producers and shipping-insurers also gain from tighter seaborne flows. Losers include airlines, tourism, container lines and EM crude importers (Japan/Korea/Taiwan) facing margin squeeze if Brent sustains >$85–$100. Cross-asset: expect a classical risk-off move — USD and gold bid, equity beta down, front-end Treasuries rally but inflation risk from oil can steepen the curve within 3–6 months.

Risk assessment: Tail scenarios include (A) prolonged closure of Strait of Hormuz for 2–8 weeks pushing Brent >$120 and triggering stagflation, (B) rapid de-escalation reversing oil and defense re-ratings within 2–6 weeks. Hidden dependencies: munitions output limited by specialty semiconductors and steel — backlog growth can be supply-constrained for 6–12 months. Catalysts to watch: contractor order announcements (next 7–21 days), OPEC+ supply decisions, and any NATO basing changes.

Trade implications: Tactical overweight defense/energy now but size conservatively. Use 1–3 month call spreads on LMT/RTX to capture re-rating while capping cost; take profits at +25–35% or if Brent trades below $78 for five sessions. Hedge macro tail risk with 30-day SPX 2% OTM puts sized ~0.5% portfolio or VIX call spreads. Rotate 2–4% from high-duration tech (QQQ) into XLE, mid-cap defence suppliers, and war-risk insurers.

Contrarian angles: Consensus may overpay LMT/RTX — smaller specialty suppliers (electronic fuzing, naval sensors) are often under-owned and can double on multi-quarter backlog recognition; exchanges (NDAQ) may be oversold — fee diversification cushions downturns. Historical parallel: Gulf War 1990–91 saw sharp oil spikes then mean reversion in 6–9 months — plan exits on objective oil thresholds, not calendar alone.