Iran ceasefire is over and oil is surging — ride the defense stock rally
Thesis
The breakdown of the Iran ceasefire is doing exactly what you'd expect: sending oil prices up over 5% and causing a broad stock market scare. But while the Dow and S&P tumble, defense stocks like Lockheed Martin and Northrop Grumman are rising as investors anticipate increased military spending and prolonged conflict in the Middle East. This divergence—defense going up while the rest of the market goes down—is the easiest way to trade geopolitical shocks. As long as the Iran situation remains unresolved and oil stays elevated, defense contractors should continue to outperform.
Strategy approach
Build a momentum strategy that enters long LMT and NOC on D1 when front-month crude oil futures (CL=F) gain > 4% in a single session and SPY drops > 1%. Hold for up to 15 trading days. Exit if oil futures give back 50% of the breakout day's gain, or use a tight 5% trailing stop.