This morning, Zonebourse wrote in its daily column, after the ceasefire decided in the Middle East, “extreme arbitrage enthusiasts will probably be long on airlines and oil sellers”. But many other sectors are affected by spectacular surges or astonishing collapses. Explanations.
The movement observed on the markets can be explained firstly by the rapid disappearance of a major geopolitical risk premium. The closure of the Strait of Hormuz brought back a scenario of global energy shock, with immediate consequences on oil prices, inflation and growth expectations. Its reopening, following the fifteen-day ceasefire with Iran, mechanically triggers a reverse movement: that of normalization.
No need to repeat the story on the importance of the Strait of Hormuz, the web, newspapers and networks are full of experts who have explained everything in detail. The upheaval following the two-week truce decided last night between Washington and Tehran is directly reflected in sectoral performance.
Tourism, an obvious fact
Air transport and tourism stocks are among the top beneficiaries. Their business model being heavily dependent on the cost of fuel, the expected relaxation in oil prices translates into an immediate improvement in margin prospects. Added to this is the return of better visibility on international flows, which supports demand expectations. In the morning, Air France-KLM made +14%, the tour operator KING AG gains 11% and Accor is +8%. Logical, everyone understands what is happening.
The cyclical industry in the broad sense
Cyclical industrial stocks are also progressing. They had been penalized by the prospect of an energy shock likely to weigh on global activity. The reduced risk of recession and the stabilization of energy costs allow the market to return to a more orderly growth scenario, favorable to players exposed to investment and production. Saint-Gobain, Buzzi, Heidelberg Materials construction side gain 9% or more. In the automobile, Volvo Cars, Continental, Renault or Stellar take more than 7%. We will also note the Olympic form of the engine manufacturers Safran (+11%) et Rolls-Royce (+9%), which are doubly concerned by the cyclicality of activity and the better fortunes of airlines.
The bank sensitive to standardization
The banking sector is also benefiting from this movement. The removal of extreme risk reduces concerns about rapid deterioration in credit quality and widespread financial stress. Investors are lowering the likelihood of a crisis scenario, which supports sector valuations. Establishments exposed to market activities are on the rise (Société Générale +9%, Commerzbank +9%, Barclays +8%). Those with high leverage, like Greek banks Piraeus Bank et Eurobank benefit even more with gains of more than 15%.
Tech et matières premieres en forme
On the side of industrial technologies and semiconductors, the logic is comparable. The standardization of energy and logistics conditions restores visibility on supply chains and investments. The market anticipates a less constrained environment for industrial activity. Soitec (helped by Jefferies in parallel) takes 10%, Infineon 9% or Schneider 8%.
Finally, values linked to raw materials benefit from a more indirect effect. They had suffered from rising fears of recession. The ebbing of these concerns favors a repositioning on cyclical assets sensitive to global demand. We find steelmakers (Salzgitter +19%, ArcelorMittal +11%…), industrial mining (Antofagasta +12%, Anglo American +10%) and myself from gold and silver mines (Fresnillo +9%).
Oil and fertilizer under high pressure
On the downside, the expiatory victims are easy to identify: woe to the energy specialists: Maurel (-13%), Equinor (-12%), BP Plc et TotalEnergies (-6%). The fall in the price of a barrel will cut into their copious future profits. We also find some fertilizer players (K+S et Children lose more than 10%), because they benefited from shortages which guaranteed them opulent margins. Defensive files (Orange-1.5% or RWE-1.5%) miss the rebound, but limit their losses: investors know that the feast may not last forever.
