Financial markets experienced renewed volatility for a second day as fighting in the Middle East intensified, lifting energy prices and triggering widespread stock market weakness across major regions.
European benchmarks weakened notably, with the STOXX 600 sliding more than 3% and the U.K.'s FTSE 100 down 2.9% by 10:44 GMT, a move that put the FTSE on course for its worst session in 11 months. Asian markets also endured sharp declines: Japan's Nikkei 225 fell 3.1% and South Korea's KOSPI plunged 7.2%. In the United States, S&P 500 futures were down 1.8% after the S&P 500 index had finished Monday roughly flat.
Against this backdrop, JPMorgan's trading desk issued a sector-level breakdown of likely winners and losers as the geopolitical situation unfolded.
On the positive side, the bank highlighted defense primes as beneficiaries, citing demand drivers such as missile defense deployments, adoption of drone warfare and the need for munitions restocking. North American energy companies were also singled out - a broad group that the desk said includes exploration and production firms, refiners, domestic oilfield services, liquefied natural gas operators and midstream businesses - which it expects could capture supply gaps as buyers seek alternatives.
Cybersecurity stocks were identified as positioned to gain amid an "elevated threat environment," given their role in protecting critical infrastructure. The desk additionally noted that tanker freight rates could surge if voyages lengthen because trade flows reroute to avoid disrupted areas, and that precious metals could see strength from increased safe-haven demand.
On the negative side, JPMorgan flagged consumer discretionary names and global brands as vulnerable to a combination of inflation expectations, Asia supply chain risk and broad risk-off sentiment. Travel-related industries were described as particularly exposed: cruise lines face heightened fuel cost pressure - especially operators that are unhedged - as well as potential regional port disruptions; airlines confront both rising fuel expenses and the prospect of regional route suspensions.
The trading desk also called out travel companies and online travel agencies as susceptible to a pullback in discretionary spending and the risk of regional booking collapses, a dynamic that could amplify weakness in consumer-facing segments if the geopolitical shock persists.
Market participants and sector-focused investors may need to weigh these JPMorgan assessments while monitoring evolving geopolitical developments, energy price trends and regional operational disruptions that could affect supply chains and demand patterns.