The recent US-Iran conflict, including US strikes on Iranian military targets and Iran's retaliatory attacks, has caused significant market volatility. Investors are cashing out tech profits, while sectors like healthcare and energy show potential. Key stocks and ETFs such as SpaceX, MOA, DRAM, UVXY, and XLE are highlighted for their risk-reward profiles amid geopolitical uncertainty and upcoming economic events.
The escalating conflict between the US and Iran has sent ripples through the global stock markets, causing increased volatility and prompting investors to reassess their portfolios. This article delves into the recent developments in the US-Iran tensions, their impact on the stock market, and highlights key stocks and sectors to watch in the coming weeks.
Over the recent weekend, the US Pentagon conducted strikes on 10 Iranian military targets following Iran's attack on a Panama-flagged oil tanker near the Strait of Hormuz, which was carrying over 2 million barrels of crude oil. The US strikes targeted missile storage, drone facilities, coastal radar sites, air defense, and communication systems.
In retaliation, Iran launched missiles and drones at US military assets in Bahrain and Kuwait. Most of these threats were intercepted, and no American casualties have been reported so far.
Former President Trump issued a stern warning, stating that the US might be forced to "militarily complete the job" it started, implying that if such action occurs, Iran "will no longer exist."
Notably, the Pentagon delayed the public announcement of these strikes until after the US stock market had closed on Friday, likely to mitigate immediate market panic.
Iranian state media has also suggested that Iran may pursue nuclear weapons to deter military action, although this has not been officially endorsed by Iranian government officials. The previous Supreme Leader had banned the pursuit of nuclear weapons, but with changing political dynamics, the situation remains uncertain.
US technology sector funds experienced a significant outflow of $15 billion last week, marking the largest weekly withdrawal in over two and a half years and more than double the previous week's outflow. This indicates investors are cashing out substantial profits amid geopolitical uncertainty.
SpaceX is set to join the NASDAQ index on July 7th, marking the fastest inclusion in the index's history due to rewritten rules for the company. However, SpaceX's stock has fallen over 32% from its highs 12 days ago and is nearing its IPO lows, with a critical support zone around $150. Insiders are currently restricted from selling shares, with a significant unlock scheduled for August 11th.
Historically, healthcare has a 100% win rate in the latter half of midterm election years, with average returns from July to December outperforming other sectors. This trend suggests healthcare stocks may offer resilience and growth opportunities during this period.
Conversely, the tech sector tends to underperform during this timeframe, and real estate has never posted positive returns from July to December in midterm years.
The S&P 500 (SPY) is currently down 3.84% from its highs and has been in a downtrend over recent weeks, with accelerated sell-offs observed last week. Key resistance is noted around 736, while support zones to watch include 722-722.50, 712-710, and 700-702. These levels will be critical in assessing the market's direction.
The VIX volatility index typically rises from July to October during midterm years, indicating potential for significant market swings and trading opportunities in both directions.
June, traditionally a weak month for stocks in midterm years, has passed, and July historically marks a strong month for the market.
This week is packed with important economic data and events:
Additionally, the stock market will be closed on Friday for Independence Day.
MOA has shown a strong short-term run, spiking 12.5% on Friday following a unanimous FDA advisory committee vote favoring its investigational seasonal influenza vaccine. The stock held gains well despite a late-day pullback and broke above recent resistance levels. Watch for a break above $70 as a bullish signal.
The DRAM ETF has been one of the hottest performers this year but faces downside risks due to recent news that Apple is seeking US clearance to buy memory chips from China's largest memory chip maker. Micron (MU) reported strong earnings but saw a muted stock reaction. DRAM could face further profit-taking amid geopolitical tensions.
UVXY, which tracks market volatility, moved up slightly last Friday. Given the Pentagon's delay in announcing strikes, concerns about market drops remain. UVXY has historically surged during market sell-offs, such as a 70% rise in early March during previous Iran-related tensions. It remains a key instrument for traders anticipating increased volatility.
XLE, representing the energy sector, is down roughly 15% from its March highs but offers an attractive risk-reward setup with strong support around $53-$54. Given the ongoing Iran situation, energy stocks could see significant movement.
A notable trade involved a $6.47 million purchase of December 2026 call options with an $80 strike price, paired with a short position on $115 strike calls, representing a bullish call debit spread. Viasat, a provider of high-speed satellite broadband and networking systems for military and commercial markets, has surged over 550% since 2025.
On June 11th, Viasat secured a prime contract with the US Space Force to build and deploy a fleet of small, maneuverable military satellites, boosting investor interest.
Technically, VSAT is approaching a key support zone around $54-$57, having pulled back approximately 31% from recent highs, presenting a potential buy-the-dip opportunity.
The US-Iran conflict has introduced significant uncertainty and volatility into the stock market. Investors are responding by reallocating assets, with notable outflows from tech and increased interest in healthcare and energy sectors. Key stocks and ETFs present both risks and opportunities amid this geopolitical backdrop.
Traders should monitor critical support and resistance levels in major indices, stay informed on upcoming economic data releases, and consider the potential for increased volatility in the months ahead. As always, disciplined risk management and informed decision-making remain paramount in navigating these turbulent times.
Stay vigilant and keep an eye on the evolving situation as it continues to shape market dynamics.
