Iran-Israel Tensions: Analysis of the Drop in Stock Indices and Sectors to Watch
Updated June 2025
Stock indices fell after Israeli strikes on Iran: analysis of impacted sectors, winners and losers to monitor right now.
A Geopolitical Shock Shakes Financial Markets
The fall in stock indices this Friday morning comes in a context of high geopolitical tension after the State of Israel struck Iranian military and nuclear targets in what appears to be a response to escalating threats to its national security. In reaction, futures on the S&P 500, Nasdaq 100, and Dow Jones dropped by 1.5%, 1.5%, and 1.4% respectively. This sudden correction marks a sharp return of risk aversion in markets, which had recently been dominated by optimism over anticipated Federal Reserve rate cuts.
Stock Index Drop: What Immediate Consequences on the Markets?
The fall in stock indices reflects an instinctive reaction from investors facing a hard-to-model exogenous factor: war. History teaches us that major geopolitical conflicts—particularly in the Middle East—create a volatility shock affecting equities, commodities, and currencies alike. However, it often remains a short-term reaction.
Increased Volatility in Equity Markets
- VIX Volatility Index up +8% to 21.6 points.
- Immediate sector rotation into safe havens such as gold, defense services, and energy.
- Technology and consumer discretionary under pressure.
According to a BlackRock (2022) study, a geopolitical crisis leads to an average 7–10% drop in global equities in the first two weeks, except in the case of prolonged escalation.
Israeli Strikes on Iran: Catalyst for an Oil Shock?
Oil Surges: Heading to a New Psychological Threshold?
- WTI: +7% to $71.84
- Brent: +7% to $73.53
The Strait of Hormuz, through which 20% of the world’s oil passes, is at the heart of concerns. Should Iran block this strategic passage, oil could exceed $100 per barrel.
Jeffrey Currie, former Goldman Sachs, mentions a potential +25% surge in energy prices in case of prolonged escalation.
Crisis Winners: High-Potential Sectors
Energy (ETF: XLE)
- ExxonMobil (XOM)
- Chevron (CVX)
- ConocoPhillips (COP)
- EOG, Pioneer (PXD), Devon (DVN)
Defense (ITA, XAR)
- Lockheed Martin (LMT)
- Raytheon (RTX)
- Northrop Grumman (NOC)
- General Dynamics (GD)
🪙 Gold and Precious Metals
- Gold → $3422
- Barrick Gold (GOLD), Newmont (NEM), Franco-Nevada (FNV)
Cybersecurity
- Risk of state-sponsored cyberattacks
- Palo Alto Networks (PANW), CrowdStrike (CRWD), Zscaler (ZS) : stocks to watch
Crisis Losers: Most Vulnerable Sectors
Technology (QQQ, XLK)
- Tesla, Nvidia, Amazon ...
- Highly sensitive to real rates
Consumer Discretionary (XLY)
- Cost increases → reduced purchasing power
- Amazon, Tesla, Carnival, Royal Caribbean...
Transportation & Logistics (IYT)
- FedEx, UPS
- Delta, American Airlines
Industry / Chemicals
- Commodity prices rising
- Increased supply chain fragility
Contagion Risks: Towards a Regional Financial Crisis?
A potential Iranian retaliation could worsen the situation. Scenario to watch:
- Sovereign CDS rising in the Gulf
- Depreciation of emerging currencies
- Huge inflows into the US dollar and Swiss franc
According to Nouriel Roubini, this type of combination (war + oil + inflation + financial stress) could trigger a mini-global crash.
How to Protect Yourself?
Geographic diversification / Reducing exposure to assets sensitive to tensions
Hedging products
Increase cash
Conclusion: Towards a New Market Regime?
The Israeli attack is a geopolitical event, but it was anticipated by the market. What happens next will determine the degree of consolidation. The aim is to take some cash but not give in to panic.
Sylvain Mouilhaud US Equities Coach
