Global stock markets began the week in a risk-averse mood after the U.S. and Israel carried out strikes on Iran, prompting investors to reposition portfolios toward energy and defense names and away from travel and consumer-facing sectors.
By 08:52 GMT several large energy companies had posted notable gains, with BP, Shell, Var Energi, Equinor, Galp, TTE and Repsol all advancing roughly 3.5% to 7%.
Defense-related equities also saw sizeable moves higher. BAE Systems climbed more than 7%, Renk Group added 6.3%, and Hensoldt jumped 7.5%. Rheinmetall, Leonardo and Thales all rose as well, each gaining between 4% and 6%.
Market strategists described an environment in which elevated energy prices could penalize growth-exposed parts of the market. "Monday should see volatility and selling in tech and cyclicals, and the reason for that is that, because of the actions that we’ve seen, there will be a significant risk that rising energy prices penalizes growth," said Matt Gertken, chief geopolitical and U.S. political strategist at BCA Research. "We should globally see defensives and energy outperform," he added.
The latest flare-up in the Middle East has also pushed oil and gas prices markedly higher. Oil futures rose more than 8% on Monday to reach multi-month highs following the strikes and Iran’s retaliatory response. Analysts said prices are likely to remain elevated in the near term as the market evaluates the risk of supply disruptions, with particular attention on shipments through the Strait of Hormuz, which handles more than one-fifth of global oil flows.
In published commentary, Citi analysts set out a base-case trading range for Brent crude of $80 to $90 per barrel for at least the coming week, while noting that prices could retreat toward $70 if tensions ease.
Strategists broadly expect the heightened military tensions to spur rotation into traditional defensive sectors such as utilities and healthcare, which historically have held up better through periods of economic stress. Conversely, higher-risk growth shares and economically sensitive sectors, including industrials and financials, may face renewed selling pressure if energy costs rise materially.
Investors monitoring the market will be watching how sustained any oil price move becomes and whether the military developments translate into longer-lasting supply disruptions or only a short-lived premium priced into crude.
Sectors affected:
- Energy - upward pressure and outperformance.
- Defense - strong gains and sector rotation into defense names.
- Technology and cyclicals - vulnerability to selling if energy prices penalize growth.
- Consumer-facing sectors and airlines - under pressure amid the risk-off move.