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What happens in Iran after the elections… oil’s paradox returns… what peace would mean for Louis Navellier’s energy winners… America’s empty missile shelves… Luke Lango on the buildup to come
As I write on Tuesday, Americans are heading to the polls, and Wall Street will be watching the results closely tonight.
As we covered in yesterday’s Digest, the outcome could tell us a lot about the AI trade. Data centers are on the ballot in more than 40 local measures, giving us a read on how fast public sentiment is turning against the AI buildout.
But there’s another major overhang that comes back into focus now that Election Day is here – and it could matter even more for the market…
Iran.
For weeks, President Donald Trump has been weighing whether to resume major military operations once the midterms are behind him.
Here’s The Wall Street Journal from yesterday:
America’s Gulf allies are steeling themselves for a heavy U.S. bombardment of Iran that they expect to trigger a vicious cycle of retaliation against their own economic and civilian infrastructure as early as this week.
The signs of preparation are hard to miss…
Qatar and the United Arab Emirates have been running security drills, including at airports. Schools in Saudi Arabia’s capital are online this week. And last Thursday, Adm. Brad Cooper, the top U.S. commander in the Middle East, briefed the president on military options in person at the White House – a rare visit.
Over the weekend, the president kept his options open. Here’s Trump at a rally in Iowa on Sunday:
The only reason why I’m not finished with Iran is I want to be nice. I want to try and save all those lives if I can…
But at some point we’re going to have to give them the hammer.
Yesterday, the signals shifted toward a deal
Axios reported that Trump told Israeli Prime Minister Benjamin Netanyahu – who had urged him to resume strikes right after the midterms – that he wants to give diplomacy more time.
Later, Trump told reporters that Tehran wants “to make a deal and that could happen.” Asked whether he’d consider striking Iran after the midterms, he answered “no.”
Vice President JD Vance struck a similar tone on CNN:
The president and I both feel really good about the prospect of potentially coming to a negotiated settlement.
Qatar’s foreign ministry says its delegation is in Tehran working toward an agreement. One plan on the table would have the U.S. loosen its naval blockade if Iran halts attacks on shipping in the Strait of Hormuz.
But the fighting hasn’t stopped…
U.S. officials told the WSJ that the U.S. struck Iran’s Qeshm Island yesterday, describing it as a defensive response to Iranian attacks on U.S. assets. It was the latest in a string of “limited strikes” in recent weeks, kept deliberately low-profile to avoid signaling a major escalation.
Meanwhile, at least four commercial ships have been attacked in and around the Gulf since the start of the month, according to the U.K. Maritime Trade Operations Centre.
So, what are the two paths from here?
If a deal comes together, the fear premium baked into oil could deflate quickly.
We got a preview yesterday. Oil sold off more than 7% as Washington and Tehran both signaled openness to a settlement.
According to Goldman Sachs, as reported by Euronews, a geopolitical risk premium of about $27 a barrel “now explains most of October’s crude price rally.”
But if major strikes resume, few expect Iran to take it with no retaliation. Here’s Behnam Ben Taleblu of the Foundation for Defense of Democracies, speaking to the Journal:
There is no world in which a short and sharp strike by the U.S. will be absorbed by Iran. An intense infrastructure-based targeting campaign by Washington is likely to beget one by Tehran against U.S. partners.
That would put Gulf energy infrastructure and Hormuz shipping squarely in the crosshairs. Goldman has already raised its year-end Brent forecast to $105 from $90, citing escalation risk after the midterms.
So, while today’s elections will give investors clues about the AI trade, the days that follow could bring an even bigger source of uncertainty with market-rattling potential.
Oil’s paradox, revisited
As I write on Tuesday, Brent trades around $103.50 per barrel, and WTI is just below $96, extending yesterday’s sell-off.
Regular Digest readers will recall the paradox we highlighted in our Monday Oct. 26 Digest: more oil is leaving the Persian Gulf now than before the war began, yet prices keep climbing.
The WSJ noted again yesterday that the global surge in energy prices has continued “even with more oil shipments passing through the Strait of Hormuz.”
These elevated prices reflect the cost and danger of moving that oil as attacks on tankers push war-risk insurance and freight to near-record levels. Here’s the WSJ from last month:
War-risk insurance has climbed to as much as 10% of a vessel’s value from less than 3%, according to Windward’s Wiese Bockmann.
“In April, the problem was a shortage of crude. In October, it is the cost of moving it,” said Natasha Kaneva, head of the global commodities strategy team at JPMorgan.
That backdrop has powered two of legendary investor Louis Navellier’s favorite energy plays, which we profiled last week.
Okeanis Eco Tankers Corp. (ECO), a supertanker operator which Louis holds in his Accelerated Profits portfolio, is up 79% since he recommended it in late June.
Meanwhile, HF Sinclair Corp. (DINO), a pure-play refiner that Louis holds in Growth Investor, just posted a blowout quarter.
Last Wednesday, it reported adjusted earnings of $11.75 per share, crushing the roughly $7.80 expected by Wall Street. Its refining margin jumped 183% from a year earlier, which the company credited in part to “elevated crack spreads” – the gap between what refiners pay for crude and what they get for fuels like diesel.
The official return for DINO in Growth Investor is 73% since its late-June recommendation. I’ll note that Louis says DINO is a “buy” up to $127.
But what happens to these stocks and the broader oil trade if peace breaks out?
If a deal reopens Hormuz and drains the risk premium from oil, tanker rates and refining margins could cool, and these stocks could pull back.
ECO is especially tied to Gulf disruptions and tight tanker supply. In mid-October, it fell about 11% in a week, partly on reports that Washington might ease sanctions on “shadow fleet” tankers.
DINO, however, has a second tailwind unrelated to Iran: Russia.
Ukraine has been hammering Russian refineries, knocking out what Kyiv estimates is more than 45% of Russia’s refining capacity. After pausing for almost two weeks under pressure from President Trump, Ukraine resumed its campaign on Friday, launching attacks on three major Russian refineries in three days, according to the WSJ.
This has major implications for energy market prices. As Louis noted in a recent Growth Investor Flash Alert:
You just can’t bomb the Russian refineries. You can’t attack the Saudi Arabian refineries and expect that diesel prices are going to drop. There is a supply chain problem.
Plus, even a peace deal wouldn’t refill the world’s drained oil inventories overnight. That’s a big reason Louis has pointed toward a $90 price floor under crude.
Bottom line: ECO and DINO have been big winners for Louis’ subscribers, and that doesn’t change. But if you’re considering buying today, recognize that the next few days could move them sharply in either direction.
By the way, Louis has gone far deeper into where he sees the energy opportunity heading from here, and he’s put his research into a free presentation. You can check it out right here.
America’s depleted missile stockpile
Oil isn’t the only thing the next move in Iran will put under pressure.
Whether the president strikes or negotiates, the U.S. faces a problem that won’t disappear with a ceasefire: we’ve burned through a huge share of our missile defenses.
According to estimates from the Center for Strategic and International Studies (CSIS), the U.S. has fired up to two-thirds of its prewar Patriot interceptors since the Iran war began in February, taking the stockpile from about 2,330 to fewer than 1,000. THAAD, the system built to knock out ballistic missiles at high altitude, has used up to 48% of its interceptors.
And these aren’t items you can restock off the shelf. As CSIS senior adviser Mark Cancian told Military Times, “It takes several years to produce a missile.”
The shortage is already forcing hard choices. Buried in another WSJ article from yesterday was this line:
Ukraine has run out of air defenses, with the U.S. restricting supplies of Patriot interceptors amid a global shortage caused by the war on Iran.
A new round of fighting with Iran would only draw the stockpile down further. The WSJ reports the U.S. military has been restocking munitions in the region and sending another Patriot antimissile system to Israel.
Now, Washington is responding…
Since July, the Pentagon has signed multiyear missile contracts worth more than $100 billion combined at their full contract values, for Patriot interceptors, SM-6 missiles and AMRAAM air-to-air missiles. Lockheed Martin expects to triple its advanced Patriot production capacity by the end of 2030.
But “by 2030” tells you how deep the hole is. And much of that money still needs Congress to appropriate it – one more reason tonight’s results matter for defense, as we covered yesterday.
Now, turning to the investment implications, who gets paid to refill those shelves – and to build what comes next?
Why Luke Lango sees this as only the beginning
The “who gets paid?” question sits at the center of new research from our technology expert Luke Lango, editor of Early Stage Investor.
Luke believes America is entering its biggest military buildup since World War II, and he sees it unfolding in three phases. Restocking depleted stockpiles like the ones above is just the first. The second is mastering the future of warfare – drones, autonomous systems, and AI-powered defense. The third is rebuilding the industrial base on which those weapons depend, from critical materials to domestic factories.
He also believes Washington won’t be doing it alone…
In July, Sen. Dave McCormick’s Defense and Innovation Summit at the Army War College in Carlisle, Pa., drew nearly $10 billion in investment commitments from defense contractors, shipbuilders, and lenders, including JPMorganChase (JPM). Luke calls this growing public-private effort the “Pennsylvania Plan.”
Luke’s research looks well beyond the defense giants everyone already knows. He has identified five companies across all three phases that he believes are positioned to benefit – including a critical-materials producer with Pentagon backing. You can watch his free presentation here.
Wrapping up
Tonight’s vote count is only the start. In the days ahead, we’ll learn whether the Iran conflict heads toward a deal or a major escalation – and either way, oil prices, inflation and America’s arsenal will feel the effects.
We’ll keep you updated.
Have a good evening,
Jeff Remsburg
