3 Resilient Stocks to Safeguard Your Portfolio During Conflict

The decades-old Israel-Palestine conflict over territory held sacred to both nations saw its deadliest escalation when Hamas initiated a widespread onslaught early morning on October 7. The calamitous events that unfolded that day led to the most significant loss of lives.

The Israeli cabinet officially declared war against Hamas the next day. This was succeeded by an order from the defense minister to the Israeli Defense Forces (IDF) to put Gaza under a complete siege. Subsequently, bombings in the Gaza Strip commenced, ensnaring the region in a harrowing humanitarian crisis. The Gaza Strip, home to 2.3 million Palestinians, is rapidly depleting its reserves of water, fuel, and other supplies due to the imposed Israeli aid blockade.

Rocket fire exchanges have become a daily occurrence between the two factions, with Israel urging over a million civilian Palestinians residing in northern Gaza to evacuate ahead of a potential ground incursion. Furthermore, the risk of conflict proliferation is high, as witnessed by escalating cross-border strikes in Lebanon and Syria.

Casualties keep mounting on both ends of the battlefield with little to no signs of peaceful negotiations, especially after the blast at a hospital in Gaza has further intensified the loss of innocent civilian lives.

Sectors Affected by the Conflict

Amid amplifying tensions in the Middle East, the world is simultaneously confronting the diplomatic turbulence spurred by the Russia-Ukraine conflict and global economic instability underpinned by stubborn inflation and escalating interest rates.

In situations of military conflict, defense corporations often witness a rise in earnings, an effect reflected in the upward trajectory of aerospace and defense stocks when geopolitical strife unfolds. Military contractors’ shares soared in the Israel-Hamas conflict’s immediate fallout, attracting institutional and individual investors. The iShares U.S. Aerospace & Defense ETF (ITA) has spiraled upward about 7% since the initial onslaughts on Israel earlier this month.

The potential for disruptions in oil supply increases during such times and usually results in abrupt surges in oil prices. Furthermore, geopolitical unrest persuades investors to avoid risky stock market investments and instead explore safe-haven or defensive assets as a precaution against heightened escalation or worldwide economic deceleration. These assets encompass U.S. Treasury bonds, gold, utilities, and energy.

UBS Wealth Management states, “In a scenario where the conflict expands and draws in other regional actors, we believe safe-haven assets, including U.S. Treasuries and gold, would gain further from investors’ attempts to hedge against stronger escalation or a global economic slowdown driven in part by higher oil prices.”

Early reactions to the unrest saw oil prices rising by about 3%, a slight drop in stock futures, and a 1% climb in gold, while Treasury futures experienced a rise, consequentially diminishing yields.

Given this backdrop, we undertake an in-depth analysis of stocks Lockheed Martin Corporation (LMT), ChampionX Corporation (CHX), and Dundee Precious Metals Inc. (DPMLF) now.

Lockheed Martin Corporation (LMT)

Amid burgeoning global geopolitical tension, interest in military spending has not dwindled, fueled by the necessity to refresh existing conflict arsenals and prepare for future defense requirements. This situation benefits LMT, whose sizable order backlog has remained robust at $156 billion due to healthy domestic and international demands.

Bethesda, Maryland-based company LMT, with a market cap of over $111 billion, reported a better-than-anticipated third-quarter revenue and profit as geopolitical unease stimulated sustained demand for its military equipment. Consequently, the U.S. defense contractor shares rose about 2%.

The conflict in Ukraine has elicited a need for…

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