How To Trade Markets During War
532: Stock Picks, Macro Thoughts, Black Swans
Morning everyone.
Well things got dialed up on the global stage which means we need to come with a classic Arbitrage Andy trading guide meant to help you navigate a new War overseas.
We’ve done these in the past (I think we did one for Russia/Ukraine) and people enjoyed them and ended up making some money.
There’s quite a few pieces of this Iran debacle worth discussing, but what’s particularly striking right off the bat (besides us apparently annihilating Iran in like 24 hours) is the economic ramifications rippling throughout the region already (and the way these are shifting financial markets).
As of this morning, here is the most concise summary of what’s taken place so far in Operation Epic Fury:
After months of escalating tensions between Iran, Israel, and the United States, driven by Iran’s nuclear program, proxy warfare, and repeated regional clashes, the conflict crossed a major threshold on the 28th of February.
Early reports indicated that senior Iranian leadership figures were killed in the opening strikes including Ayatollah Khomeini and his wife
CNN is reporting 18 U.S. soldiers are seriously wounded with 4 killed
Yesterday the Pentagon announced all 11 Iranian military vessels in the Gulf of Oman have sunk lmao
Hussein Makled, the head of Hezbollah’s intelligence headquarters was eliminated in a precise strike in Beirut
The Strait of Hormuz became effectively disrupted, as Iran issued warnings and demonstrated its ability to threaten commercial shipping, raising global energy market risks
Saudi Arabia warned Iran it’ll respond if attacks on its oil facilities continue
CENTCOM reported at 11:03 p.m. ET, March 1, three U.S. F-15E Strike Eagles flying in support of Operation Epic Fury went down over Kuwait due to an apparent friendly fire incident. Insane videos of pilots being approached by locals spread online yesterday
The NYPost and other outlets are reporting President Trump says he won't rule out boots on ground in Iran
Quite a bit to keep up with and keep that in mind reading today’s guide, this is a fluid situation and the updates come out by the hour.
Big thing here to take note of is that this is no longer a proxy conflict or limited exchange. It represents:
direct U.S. x Israel x Iran warfare
leadership level targeting (we absolutely murked Iran’s ranks)
regional spillover across multiple countries (probably more than US officials expected)
and a serious threat to global energy flows (which impacts how we make money)
I posted a new Arbitrage Andy schizo montage of the military industrial complex on Instagram that went turbo viral (some of my finer work) and there were people complaining about how it was pro war, Israeli propaganda, etc.
Guys, the more intricate points and nuance of this all are not lost on me.
I don’t really think this was a good idea and I definitely think assuming a Venezuela type “hit and quit” and we’re out strategy is not going to be replicated here. President Trump ran on new wars and if this ends up dragging on or resulting in the loss of more American lives it is going to have serious political consequences for this administration and in midterms.
Doesn’t mean we can’t marvel at the might of the US and Israeli military. I mean for god’s sake Israel hacked into Tehran’s traffic cameras months before to find the ayatollah and identify his pattern of life lol.
Insane.
Still Polymarket has the chances of a ceasefire by March 31st at almost 50% right now.
A lot of people are asking why this is happening now.
And while there’s probably some obvious reasons why this might be happening (targeting oil and by extension China, helping Israel, taking out Iranian proxy networks in the Middle East, crippling nuclear ambitions for good) it’s also worth mentioning there’s pieces of all of this we probably don’t have a clue about.
To name a few ancillary possibilities that aren’t likely but definitely possible:
Trump and his admin may have tied Iran to his assassination attempts
They may have advance knowledge of a plot to attack the US by Iran or sleepers and got ahead of it for optics reasons or to cripple such a plot
They may have insight into future (soon) nuclear capability or conventional planned attacks in the region. Before you laugh at the nuclear piece, a 4.3 magnitude earthquake rocked the Gerash region in Iran this morning according to reports by Al Jazeera, leading some people to speculate about nuclear tests
Worth a thought or two. Fog of war is powerful, we don’t have the full picture. It’s difficult to get a clean read on what’s really playing out on X and online.
Now that we have a basic lay of the land let’s discuss how to trade and position in war time markets. We will do a basic review of:
Natural gas
Oil
Gold/Bitcoin/Silver
Defense
Paid subs have already capitalized on quite a few names leading into this shit show, but today I want to review the basics, lay out all tickers/picks I think are relevant, and give some thoughts on how markets might behave in the coming days and weeks.
“Who takes over now that the supreme leader is dead?”
—Reporter
“I don’t know… I guess the position’s open. I’m creating jobs in Iran too.”
—President Trump
Trading War Time Markets
Making money during war is a tale as old as time.
During World War II, U.S. industrial stocks surged as defense production ramped up and the economy shifted into full mobilization. While the sheer scale of that conflict dwarfs most others, companies tied to steel, aircraft, and manufacturing became core beneficiaries of wartime spending.
In Operation Desert Storm (1990–1991), markets initially sold off, then oil spiked ahead of the invasion, and then equities rallied sharply once the immensely successful air campaign began and the conflict looked to be decisive.
When George W. Bush invaded Iraq in March 2003, markets initially rallied as uncertainty clearedd and investors shifted from “will there be war?” to “how fast will it end?” U.S. equities rose sharply in the weeks following the invasion, oil prices fell from pre war spikes, and gold pulled back as fear premiums unwound.
The takeaway seems to always be a return to classic risk on behavior.
What we generally see is that markets tend to sell the buildup to war and buy the moment conflict becomes a known, priced reality. Everyone has heard of the internet meme “everything is priced in”.
There’s 5 core tenants I like to keep in mind when trading a war or bigger conflict to avoid getting blindsided:
Don’t chase the first spike you see. The initial headline move is often emotional. The better trade usually comes after positioning resets or after you get an unexpected secondary dump (we may be here today)
Make sure to distinguish fear from actual supply shocks. Oil or gas moves tied to actual infrastructure damage are different from moves based purely on rhetoric or insane X threads
Watch what risk assets do after the first 48 hours. If equities and crypto stabilize despite bad headlines, that tells you positioning was already defensive. This kind of happened already but again, today will be a huge tell.
Size smaller than you usually would if trading short term. War headlines create intraday volatility. Even if you are right and nail timing, “correct” trades can still get murked.
Focus on second order effects. Defense, energy infrastructure, cybersecurity, drones, and logistics often benefit more structurally than the broader indices (we will talk about these today)
At the time I am writing this the situation looks similar to past wars.
Hopefully I don’t jinx it and Iran ends up setting off a dirty bomb or something wild. Doubtful though, you have to kind of feel bad for Iran, they are getting absolutely fucked on right now lmao or at least that’s how it appears to us in the US.
So far this week, markets appear to be following that same script we’ve seen in the past. Equities initially wobbled on the headlines, oil and natural gas spiked on supply risk, and then safe havens caught a bid.
BUT once the strikes became reality rather than unending speculation, risk assets began stabilizing.
Bitcoin even pushed higher while the Dow Jones Industrial and S&P 500 ended yesterday flat. Gold also appears to no longer be accelerating the way it was during the buildup phase of the last couple months or so.
Let’s take a look at a few areas to hone in on if you’re looking to trade and take advantage of some of the volatility surrounding this new conflict. Normies are panicking, giga chad mogmaxxers are identifying the opportunities to be had.