As missiles continue flying across the Middle East, defense stocks are surging, cruise and airline shares are falling, and investors are nervously watching the Strait of Hormuz, which carries 20% of global oil.
The conflict is creating leaders and laggards, JPMorgan analysts wrote Monday. A steady erosion of missile interceptor stockpiles has sent shares of defense contractors higher. American LNG suppliers surged in Monday trading; and tanker rates doubled in less than one day. (Semafor’s Tim McDonnell notes that fear, and a lack of insurance, are probably bigger impediments than a potential blockade of a 20-mile-wide strait.)
The big laggards: Cruise and airlines, which are, to varying degrees, exposed to whipsawing fuel prices. Royal Caribbean, which hedges roughly 60% of its fuel costs, was less affected than Norwegian and Carnival. Airlines hedge more religiously but also have to contend with regional route suspensions, JPMorgan noted. A popular Wall Street bet on emerging markets is also taking it in the teeth.
