Good morning. When geopolitical events unfold, I always find it useful to see what markets are doing. Investors often back their predictions with their portfolio adjustments — and right now they are sending a clear signal about the Middle East.

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Falling defense stocks

Investors seem to think Israel and Iran will soon stop firing missiles.

At least that’s the obvious conclusion from watching how defense stocks traded on Monday.

It’s no coincidence that shares of defense contractors all tumbled after The Wall Street Journal reported Iran signaled it wants to de-escalate hostilities with Israel and negotiate a deal.

Here’s how the following names moved on Monday:

• Lockheed Martin: -3.99%

• Northrop Grumman: -3.72%

• L3Harris Technologies: -3.59%

• General Dynamics: -1.31%

At the end of last week, equity and commodity traders had positioned themselves for war. Oil prices spiked and the S&P 500 sold off, while the above defense stocks had a banner trading session on Friday. 

That quickly reversed, and each of the three US benchmark stock indexes closed positive on Monday while oil prices fell. 

Indeed, stocks have proven to be extremely resilient to geopolitical uncertainty over the last century.

Over 25 major military events and conflicts including the Pearl Harbor attack, shooting of Ronald Reagan and the start of the Ukraine war, the S&P 500 has declined an average of 1.1%, according to data from LPL Financial.

Here are five of the worst one-day losses for the S&P 500 tied to moments of conflict in history: 

• 1941: Pearl Harbor, -3.8%

• 1950: North Korea invasion of South Korea, -5.4%

• 1963, JFK assassination, -2.8%

• 2001: 9/11 attacks: -4.9%

• 2013: Boston Marathon bombing, -2.3%

Many of the severe market declines that happened at the start of a conflict have come during shaky economic periods.

Geopolitics tends to exacerbate already-weak moments, leading to sell-offs. 

“This history should be reassuring to those who may be understandably nervous about the latest events in the Middle East,” said Jeff Buchbinder, chief equity strategist for LPL Financial. 

Forward 12-month returns for stocks, too, have been favorable across major geopolitical shocks.

As the chart below illustrates, the S&P 500 has averaged a 14.2% gain in the year after a major world crisis.

In markets, short-term volatility never goes away but the long-term trend remains intact, no matter the war or tragedy.  

There’s wisdom in the most simplistic takeaway here.

Even when the world changes overnight, markets typically shrug it off shortly thereafter. 

Market snapshot

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Elsewhere

🚨Trump team proposed Iran talks this week on a nuclear deal. Late Monday, the White House proposed a ceasefire agreement to end the conflict between Israel and Iran. The meeting hasn’t been finalized, but it marks the president’s latest effort to stave off war in the region. (Axios)

📉 Gen Z feels trapped by this economy. Young people have never been this educated or tech-savvy, yet they face a labor market disrupted by AI, a lack of affordable housing, and broad pessimism. Add in the detriments of excessive social media use and it’s no wonder the kids are not alright. (Long read)

📈 US Steel stock surged after Trump approved the Nippon takeover. The president gave the green light to the two companies to merge, and they were required to sign a national security agreement that gives the US a “golden share.” US Steel closed 5% higher Monday. (CNBC)

🤝 The US and UK made a trade deal. President Trump and British PM Keir Starmer signed the deal they had agreed to last month at the G7 summit in Canada. The contract covers car tariffs and aerospace, but details remain limited. (Yahoo Finance)

Rapid-fire

• Senate Republicans released revised tax cuts and debt limit bill (Bloomberg)

• The Trump Organization unveiled a mobile phone plan and $499 smartphone (CNBC)

• A herbal medicine stock with no sales has rallied 64,000% (Bloomberg)

• AMD stock jumped 9% after analysts at Piper Sandler said they expect a surge in its GPU business later this year (CNBC)

• Chinese retail sales jumped unexpectedly even as factory activity slowed down (WSJ)

• TikTok will go dark June 19 unless Trump provides another lifeline (Yahoo Finance)

Last thing

About me

📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter to prepare you for each trading day — unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else.

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