Defense stocks soar, airline shares fall on Middle East conflict
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.
