76report

June 23, 2025

Did Trump Just Bring Peace to the Middle East?

CONGRATULATIONS TO EVERYONE! It has been fully agreed by and between Israel and Iran that there will be a Complete and Total CEASEFIRE (in approximately 6 hours from now, when Israel and Iran have wound down and completed their in progress, final missions!), for 12 hours, at which point the War will be considered, ENDED! - Donald J. Trump, Truth Social (6/23/2025, 6:02PM EST)  

On Saturday evening, President Trump sent a squadron of B-2 bombers on a surprise mission to destroy key pieces of Iran’s nuclear infrastructure.

About 48 hours later, just after 6PM EST on Monday night, he announced a ceasefire. If honored, as he expects, this will quickly transition into a permanent end to the Israel-Iran conflict.

Anticipation of potential U.S. involvement in the conflict has for weeks generated banter of global chaos, if not World War III.

Yet stocks advanced sharply on the first trading day after the raid.

Futures markets, as we write Monday evening, point to further upside.

Despite all the hand-wringing, including from many supporters of Trump within the MAGA base, American involvement from a market perspective is quickly starting to look like a decidedly positive development.

While the dust is far from settled—and military conflict always has the potential to move in all kinds of undesirable directions, there are many factors that suggest the market has it right this time.

Out of options

When it comes to retaliation, Iran has suffered a humiliating and strategically significant setback but now has few good options. Iran is also unlikely to convince other major powers to intervene on its behalf.

This afternoon, Iran did launch three missiles at Al Udeid, the regional headquarters for U.S. Central Command in Qatar. The move was reportedly telegraphed in advance, and the missiles were easily intercepted.

The Iran retaliatory strike was inconsequential, seemingly by design.

Iran was able to save face and “do something” after Operation Midnight Hammer did substantial damage to its nuclear facilities at Fordo, Natanz and Isfahan. But this superficial counterattack did no real harm to U.S. interests and therefore was unlikely to lead to an escalation.

Prior to the ceasefire announcement this evening, Trump appeared to be playing along with the symbolic gesture and shifted focus towards a diplomatic resolution.

Source: TruthSocial  (6/23/2025 3:52PM)

Market reaction

Major stock market indices closed up nearly 1% today. Stocks declined briefly after the missile attack on Qatar made news but then rallied as reports circulated on the symbolic nature of the maneuver.

Over the weekend, in the aftermath of the raid, Bitcoin traded down, approaching $98,000, but has since moved back toward the $105,000 level.

Both the S&P 500 and Bitcoin are now just a few percentage points away from their all-time highs.

Gold typically performs well in periods of geopolitical crisis. Now trading near $3,400 per ounce, gold was up slightly today but remains in the trading range that it has occupied since first crossing the $3,400 threshold about two months ago.

S&P 500, Bitcoin, Gold

(Total Return - Year to Date)

Unsurprisingly, energy is the area of the market that has been most affected by the events in the Middle East. Oil prices were quite volatile today.

West Texas Intermediate Crude Oil traded around $75 per barrel for most of the day but fell below $70 by the end of the trading day in response to signs of de-escalation.

Oil is still above lows around $60 reached in April and May, when oil prices had retreated to levels not seen since early 2021.

But oil is also well below recent peaks above $120, which were set after Russia invaded Ukraine in 2022. On a one-year basis, despite the jump in prices over the last three weeks, oil is down about 15%.

Crude Oil (Last 3 Years)

Will supply be interrupted?

Oil prices may not be high in the context of recent history, but they have bounced off recent lows because of concerns of potential supply impacts.

The market’s greatest concern appears to be the risk of Iran retaliating against the U.S. by shutting down or otherwise restricting the flow of oil and other goods through the Strait of Hormuz.

The Iranian Parliament actually voted to approve closure of the Strait of Hormuz, a narrow, strategically vital waterway that connects the Persian Gulf to the Gulf of Oman and, by extension, the Arabian Sea and the Indian Ocean.

Iran is situated on the north side of the Strait, which is about 20 miles wide at its narrowest point but only navigable within a 2-mile wide channel.

The Strait of Hormuz is a notorious chokepoint for global commerce. The move by Iranian Parliament represents a symbolic flex of the damage Iran could do to the global economy.

But for Iran to take military action to shut down the Strait of Hormuz requires approval by senior members of the regime. There are many reasons to believe they will not take this extreme step, especially given the feeble and choreographed military response we saw earlier today.

The Iranian economy is built around oil and natural gas exports. So Iran itself is dependent on traffic flowing freely through the Strait to generate revenue.

Additionally, the vast majority of oil and gas that flows through the Strait is destined for Asian markets.

About a quarter of these energy shipments, including shipments from Saudi Arabia, Kuwait and Abu Dhabi, go to China, which is one of Iran’s most valued strategic relationships.

Iran could inflict a lot of pain on the world by restricting traffic through the Strait of Hormuz, but the implications would be severe and likely provoke a direct American response to keep energy supplies flowing.  

Short of the Strait of Hormuz getting shut down entirely, there are other scenarios that could conceivably play out that would reduce oil deliveries to the rest of the world.

On the other hand, Iran is likely keen to maintain a source of revenue, while Saudi Arabia may also sustain high production to provide stability to the market.

Oil price volatility will probably continue as market participants attempt to sort out these various puts and takes and respond to political and military developments.

Energy in a portfolio context

Energy stocks are similar to gold in that they can function as a hedge in certain circumstances. While gold might play the role of all-purpose “risk-off” hedge, energy stocks tend to do well in periods of military conflict.

More often than not, energy-rich nations, such as Middle Eastern countries or Russia, tend to be among the parties directly involved in military confrontations.

We do not expect the situation in Iran to evolve into a market or economic crisis. Iran’s military capabilities are vastly diminished, and its strategic partners have little incentive to exacerbate the situation.

Today’s events, from a diplomatic perspective, are also highly encouraging. For the moment, Iran appears to be taking the off-ramp.

The events of recent weeks do, however, serve as a reminder of the value of energy holdings in a portfolio context, especially domestic U.S. resource and infrastructure plays.

Within our Income Builder Model Portfolio, we have four energy sector positions. These include two domestic U.S. oil and gas exploration and production plays, which we flagged for subscribers in early May as “attractive contrarian value plays.”

Energy is an opportunity-rich sector for income-seeking investors. We continue to see value in the sector and our portfolio holdings.

Click HERE to learn more about our Model Portfolio subscription plans.

Disclaimer

FOR SUBSCRIBER USE ONLY. DO NOT FORWARD OR SHARE.