TLDR
- Trump declared the US-Iran ceasefire “over” at a NATO summit in Ankara on Wednesday
- US forces struck more than 80 targets in Iran after attacks on commercial vessels in the Strait of Hormuz
- Northrop Grumman and Lockheed Martin shares rose 1.2% and 0.9% respectively in early trading
- Crude oil jumped more than 5%, with WTI trading above $74 a barrel
- S&P 500 and Dow futures fell around 0.9% and 1.1% as markets reacted to the escalation
Trump said the US-Iran ceasefire was “over” on Wednesday, sending defense stocks higher while broader markets fell and oil surged.
Speaking at a NATO summit in Ankara, Trump told reporters: “To me, I think it’s over, I don’t want to deal with them anymore.” He also said US negotiators were still talking, but the remarks rattled markets.
The comments followed a wave of US military strikes on Iran overnight. US Central Command said American forces hit more than 80 targets in Iran on Tuesday, in response to attacks on three commercial vessels in the Strait of Hormuz.
Defense Stocks Move Higher
Northrop Grumman and Lockheed Martin shares rose 1.2% and 0.9% respectively in early Wednesday trading. General Dynamics gained 0.3%. L3Harris Technologies was flat.
Northrop Grumman Corporation, NOC
Smaller drone companies saw mixed results. AeroVironment was up 0.8%, while Kratos Defense & Security Solutions fell 0.4%. AEVEX and Red Cat were each down less than 1%.
Despite the boost on Wednesday, defense stocks have had a rough run since the Iran conflict began. Lockheed and Northrop were down 19% and 24% respectively coming into Wednesday’s session.
Investors have been worried that the conflict could help Democrats win back Congress in the midterms. A shift in Congress could put pressure on future defense spending, weighing on the sector’s outlook.
Before the fighting started, the iShares Aerospace & Defense ETF had climbed about 60% over the prior 12 months. Much of the positive sentiment had already been priced in.
Oil Surges, Broader Markets Fall
Oil markets moved sharply on the news. West Texas Intermediate climbed above $74 a barrel, and Brent rose to around $78. That was a gain of more than 5% on the day.
The Treasury also revoked a license that had allowed Iran to export oil globally. That added to fears of supply disruptions and pushed prices higher.
Stock futures dropped across the board. Dow futures fell around 1%, or nearly 600 points. S&P 500 futures dropped 0.8%, and Nasdaq 100 futures slipped 1.3%.
Markets had already been under pressure following a down day on Tuesday. The latest Iran headlines added to that pressure.
Investors are also watching the Federal Reserve. The minutes from the Fed’s June meeting are due Wednesday afternoon. The Fed held interest rates steady at that meeting, its first under new Chairman Kevin Warsh.
Markets will look to the minutes for clues about where rates are headed, even as geopolitical tensions now take center stage.
The latest development marks a sharp turn from earlier expectations of a diplomatic resolution with Iran.
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