Market Winners and Losers in the Iran War

Stocks rallied and oil prices plunged yesterday after President Trump announced a five-day postponement of strikes on Iranian power infrastructure. Today, markets are giving back part of those gains as Iran denied that any negotiations were underway.

The historic surge in oil prices and its inflationary impact has increased the likelihood that the Fed may not cut interest rates this year.

Equities have traded inversely to oil. Since the war began, the S&P 500 (SPY) has slipped 4.3%, the Dow (DIA) is down 5.4%, and the Nasdaq-100 (QQQ) has edged lower by 3.2%.

The conflict has severely disrupted global energy markets, with Iran choking off the Strait of Hormuz, a key corridor for roughly 20% of the world’s oil exports. Crude prices have jumped in response. Brent crude is trading near $100 per barrel, up roughly 50% since the start of the war.

WTI, which more closely reflects domestic crude, has not risen as sharply because US production remains largely unaffected. Even so, it has climbed as global supplies tighten.

Some regional crude benchmarks have hit record highs, and prices for physical deliveries have moved even higher.

Energy stocks have not rallied as strongly as crude. Although higher prices typically support the sector, ongoing regional disruptions are weighing on operations, particularly for companies with physical assets in affected areas.

The State Street SPDR S&P Oil & Gas Exploration & Production ETF (XOP) is up about 10%, while the broader Energy Select Sector SPDR ETF (XLE) has gained a little over 5%.

While Energy is the top performer, Technology has also emerged as one of the strongest sectors since the war began, as investors increasingly treat these stocks as defensive in a period of heightened uncertainty.

The Breakwave Tanker Shipping ETF (BWET), which provides exposure to crude oil tanker freight rates, has been rising since late 2025 due to Middle East tensions. It is the best performing ETF of the year now.

Investors have rotated out of earlier winners, including consumer staples and healthcare, while also selling sectors most exposed to rising energy costs. Airlines, banks, and autos are among the hardest hit. Materials is the worst performing sector, down 10.3%.

Gold and other precious metals, typically viewed as safe havens during uncertainty, have plunged since the war began. The SPDR Gold Shares (GLD) is down roughly 17%. Rising inflation expectations, reduced prospects for rate cuts, and a stronger US dollar have all contributed.

These metals also ran up quickly before the conflict, prompting some investors to take profits as conditions deteriorated.

Meanwhile, longer-dated Treasury yields, which are more sensitive to inflation expectations, have moved higher, pushing bond prices lower. European government bonds have sold off even more sharply, reflecting the region’s heavier reliance on imported energy.

Markets in Europe and Asia, particularly in South Korea, India, Japan, and Taiwan, which depend heavily on imported oil and natural gas, have also declined. In contrast, the US, now a net energy exporter because of the shale boom, is less exposed to external energy shocks.

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Invesco QQQ (QQQ): ETF Research Reports

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This article originally published on Zacks Investment Research (zacks.com).

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