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Saturday, October 7th, the centuries-old Israel vs Palestine conflict escalated to reach modern-day highs of violence, destruction, and uncertainty. Funded by Iran, the Hamas terrorist group attacked Israel from all angles. While scuffles in the Gaza Strip are nothing new, the difference this time is how successful Hamas was in infiltrating Israel, which is thought of as having the world's best security (barbed wire border fence, best-in-class defense technology, & the "Iron Dome" missile defense system.
How Will the Middle East Conflict Impact Stocks?
"The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick-adventurer. They will die poor." ~ Jesse Livermore
Though most of us hope for peace and a resolution to the conflict, investors must separate themselves from their emotions and continue to size up the market in an unbiased fashion. However, as investors who have experience understand, the market can never be taken at face value. For example, if investors had a time machine and knew geopolitical events ahead of time, most would not gain a significant edge. That's because markets are the master manipulator, constantly discounting the future and questioning our assumptions. Below are the 3 biggest Wall Street surprises since the conflict started:
Oil: Sell the News?
The US Oil Fund ETF has been nearly flat since the Middle East news broke. Obviously, the Middle East is critical to energy markets, especially the shipping of oil. The action in the oil patch is a classic case of the "sell the news" phenomenon. Even a rumored $60 billion mega-deal of ExxonMobil buying Pioneer Resources could not get most oil stocks into gear.
Interpretation:Oil investors with large profits from the 2023 bull move likely are using the "liquidity event" of the Middle East conflict to take profits in the short-term. Unless the war escalates dramatically, expect oil to consolidate in the short-term.
Leading Israeli Stocks Surprisingly Resilient
Many experts say that the attack on Israel is "Israel's 9/11." Nevertheless, in the face of an escalating conflict, two of the most popular US-traded Israeli stocks are exhibiting strength. Cyber security leader CyberArk Software and autonomous vehicle technology firm Mobileye are down less than 10% on the week.
Since 2018, CYBR has grown revenue consistently and dramatically as the list of data breaches grows even longer.
Interpretation: Volatility is to be expected in Israeli companies, given the geopolitical fallout. However, should the conflict de-escalate, CYBR and MBLY are positioning themselves as leading stocks.
The fact that stocks are rising in the face of bad news is a bullish sign. Furthermore, a lack of breadth (participation), a key bear argument in 2023, is dissipating. In conclusion, though the news of war is sad from a human perspective, US equities indicate that they are not largely impacted.
Bottom Line
In the wake of escalating Middle East violence, several surprising developments have emerged in the stock market. Oil is weak, Israeli stocks are flat, and equities are strong.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: USO, ExxonMobil, Pioneer Resources, CyberArk Software and Mobileye
For Immediate Release
Chicago, IL – October 12, 2023 – Today, Zacks Investment Ideas feature highlights US Oil Fund ETF (USO - Free Report) , ExxonMobil (XOM - Free Report) , Pioneer Resources (PXD - Free Report) , CyberArk Software (CYBR - Free Report) and Mobileye (MBLY - Free Report) .
Middle East Contact Fallout: 3 Market Surprises
Tensions Escalate in the Middle East
Saturday, October 7th, the centuries-old Israel vs Palestine conflict escalated to reach modern-day highs of violence, destruction, and uncertainty. Funded by Iran, the Hamas terrorist group attacked Israel from all angles. While scuffles in the Gaza Strip are nothing new, the difference this time is how successful Hamas was in infiltrating Israel, which is thought of as having the world's best security (barbed wire border fence, best-in-class defense technology, & the "Iron Dome" missile defense system.
How Will the Middle East Conflict Impact Stocks?
"The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick-adventurer. They will die poor." ~ Jesse Livermore
Though most of us hope for peace and a resolution to the conflict, investors must separate themselves from their emotions and continue to size up the market in an unbiased fashion. However, as investors who have experience understand, the market can never be taken at face value. For example, if investors had a time machine and knew geopolitical events ahead of time, most would not gain a significant edge. That's because markets are the master manipulator, constantly discounting the future and questioning our assumptions. Below are the 3 biggest Wall Street surprises since the conflict started:
Oil: Sell the News?
The US Oil Fund ETF has been nearly flat since the Middle East news broke. Obviously, the Middle East is critical to energy markets, especially the shipping of oil. The action in the oil patch is a classic case of the "sell the news" phenomenon. Even a rumored $60 billion mega-deal of ExxonMobil buying Pioneer Resources could not get most oil stocks into gear.
Interpretation:Oil investors with large profits from the 2023 bull move likely are using the "liquidity event" of the Middle East conflict to take profits in the short-term. Unless the war escalates dramatically, expect oil to consolidate in the short-term.
Leading Israeli Stocks Surprisingly Resilient
Many experts say that the attack on Israel is "Israel's 9/11." Nevertheless, in the face of an escalating conflict, two of the most popular US-traded Israeli stocks are exhibiting strength. Cyber security leader CyberArk Software and autonomous vehicle technology firm Mobileye are down less than 10% on the week.
Since 2018, CYBR has grown revenue consistently and dramatically as the list of data breaches grows even longer.
Interpretation: Volatility is to be expected in Israeli companies, given the geopolitical fallout. However, should the conflict de-escalate, CYBR and MBLY are positioning themselves as leading stocks.
The fact that stocks are rising in the face of bad news is a bullish sign. Furthermore, a lack of breadth (participation), a key bear argument in 2023, is dissipating. In conclusion, though the news of war is sad from a human perspective, US equities indicate that they are not largely impacted.
Bottom Line
In the wake of escalating Middle East violence, several surprising developments have emerged in the stock market. Oil is weak, Israeli stocks are flat, and equities are strong.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.