Stocks Enter Global Selloff; Wall Street Seeks Assets That Respond Well to War

S&P 500 futures were down 1.22 percent this morning as part of a broad global selloff in stock markets triggered by the conflict between Iran, the US, and Israel.

Even as investors entered a worldwide “risk-off” phase, some on Wall Street were positioning for gains in assets that respond well to war. (Photo: New York Stock Exchange Facebook)

The STOXX Europe 600 was down 1.76 percent in early trading; the U.K.’s FTSE 100 was down 0.63 percent before lunch. Japan’s Nikkei 225 closed down 1.35 percent, and South Korea’s KOSPI fell 1 percent, Jim Edwards reported for Fortune.

Even as investors entered a worldwide “risk-off” phase, some on Wall Street were positioning for gains in assets that respond well to war.

At Wells Fargo, Ohsung Kwon and colleagues noted that in the months following the first and second Gulf Wars, the S&P 500 rose 16 percent and 14 percent, respectively.

Unsurprisingly, oil prices rose sharply after the attack on Tehran began, climbing as much as 13 percent at one point. Gold, investors’ favorite safe-haven asset, also rose to a new all-time high.

The dollar increased as well—up nearly 1 percent against a standard basket of foreign currencies before paring some gains.

Oil contracts are usually settled in dollars, so when oil prices rise, demand for US currency also increases.

Defense stocks performed well. BAE Systems rose more than 6 percent on the UK market, while Germany’s Rheinmetall AG gained 2 percent prior to lunch.

“Higher oil and gas prices are certain as the closure of the Strait of Hormuz threatens to disrupt 15 percent of global oil supply and 20 percent of global liquefied natural gas supply, with oil prices potentially exceeding $100 per barrel if tanker flows are not quickly restored,” Alan Gelder of research firm Wood Mackenzie said in an email.

At JPMorgan Chase, Joseph Lupton and colleagues attempted to assess how serious this round of conflict is compared with previous events.

“We cannot confidently map the military or political path ahead, but we recognize that this event generates greater macroeconomic risk than recent military conflicts—the US intervention in Venezuela or the Israel-Iran conflict,” they told clients.