Oil Prices & Defense Stocks: Which Sectors Will Correct When War Ends

The ongoing Iran war is shaping global financial markets with full force. In March 2026, the S&P 500 fell by 0.4 percent, driven by rising oil prices and geopolitical uncertainty. The broad US stock index is thus in a correction phase and is trading around 9 percent below its high, as ad-hoc-news.de reports. While energy and defense stocks are benefiting, airlines, travel and transportation stocks are coming under pressure.

The key question for investors: Which sectors will correct most sharply if the war ends? The geopolitical risk premium has clearly reflected in prices over the past months. A peace settlement or diplomatic easing would reverse this effect.

Key Takeaways

• The S&P 500 fell 0.4 percent in March 2026 due to rising oil prices and the Iran war, with the index trading 9 percent below its high (Source: ad-hoc-news.de)
• Forecasts show oil prices of $50/barrel in early 2026 rising to $65 by mid-year, falling to $53 by year-end (Source: LiteForex)
• LongForecast predicts for 2027 an initial rise from $102 in January to $113 in February, then correction from spring onward
• OPEC+ is keeping 2026 production volumes stable and is not significantly expanding supply, which increases price sensitivity
• August and September 2026 are viewed as a strategic window for lower oil prices if diplomatic easing occurs
• Germany is discussing a new windfall tax for the defense industry, Italy has introduced similar levies for banks

Oil Price Under Geopolitical Pressure

Oil price developments in 2026 show a volatile picture. According to LiteForex, Brent Crude prices stood at 49 to 50 USD per barrel at the beginning of the year. Forecasts point to a rise to around 65 USD by mid-year, before prices are likely to fall back to 53 to 54 USD by year-end. Brent crude prices remain a decisive factor for the performance of oil stocks, as Sharedeals.de emphasizes.

The geopolitical risk premium currently represents a key price driver. OPEC+ is keeping its production volumes stable for 2026 and is not significantly expanding supply. While this strengthens the pricing power of producers, it also increases the sensitivity of oil prices and oil stocks to political developments in the region.

For 2027, LongForecast expects heightened volatility: Closing prices rise from 102 USD in January to an interim high of 113 USD in February, before a correction sets in from spring onward. However, this forecast is based on the assumption of continuing geopolitical tensions.

Defense Stocks on the Rise – with Risks

Defense stocks, like energy stocks, are benefiting from the current conflict. The Iran crisis is driving these stocks higher, while the broad market suffers. But the political landscape is changing: Germany is currently discussing a new windfall tax for the defense industry, as Süddeutsche Zeitung reports. Italy has already introduced similar levies for banks. The introduction of a special tax for beneficiaries was already highly controversial among energy companies in 2022, but generated more revenue than expected.

Such a tax would reduce the profit margins of defense contractors. Combined with a possible end to the war, this creates a double correction risk: declining order volumes coupled with higher tax burdens.

Which Sectors Will Correct if Peace Is Reached?

If diplomatic easing or an end to the war occurs, the following sectors are likely to correct most sharply:

• Energy stocks: The removal of the geopolitical risk premium would immediately weigh on oil prices. Analysts see August and September 2026 as a strategically favorable window for lower prices, provided geopolitical risk premiums unwind and global oil reserves saturate the market before winter demand in the Northern Hemisphere naturally pushes prices higher.
• Defense companies: Without an acute threat environment, political pressure for rearmament declines. Existing orders expire, new orders fall off. The proposed windfall tax would reinforce this effect.
• Commodity producers: Not just oil, but other commodities like copper and aluminum are trading under a war premium. A peace settlement would erode these.

Conversely, likely beneficiaries would be:

• Airlines and travel stocks: Lower kerosene prices improve margins, declining risk aversion increases travel demand.
• Transportation stocks: Logistics companies suffer from high fuel costs. A decline would significantly improve profit prospects.
• Consumer stocks: Lower energy prices ease the burden on consumers and strengthen consumption.

Consider Asset Class Correlation

Correlation describes the mutual relationship of asset classes on a scale from -1 to 1, as DAS INVESTMENT explains. A value of 1 means the segments move completely in sync. In times of crisis, correlations between risky assets often rise, making diversification more difficult.

Currently, there is a strongly positive correlation between oil prices and defense stocks, both benefiting from the conflict. If the war ended, this synchronized movement would reverse – both sectors would correct in parallel. Investors should take this dependency into account in their portfolio structure.

Positioning for Different Scenarios

The uncertainty about the further course of the conflict complicates strategic positioning. Three scenarios appear possible:

Scenario 1 – Diplomatic Easing: With successful negotiations, oil prices and defense stocks would correct rapidly. According to forecasts, August and September 2026 could mark a price trough before winter demand drives prices up again.

Scenario 2 – Status Quo: The conflict simmers on without escalation or resolution. In this case, elevated prices persist, but volatility declines. For investors, this means: The risk premium remains priced in, further gains become harder.

Scenario 3 – Escalation: Further deterioration would drive oil prices and defense stocks even higher. Global stock markets, however, would suffer significantly, as the current S&P 500 correction demonstrates.

For DACH investors, a balanced strategy makes sense: If invested in energy or defense stocks, positions should be closely monitored and profits realized at the first signs of easing. At the same time, airlines and transportation stocks could become attractive as a counterposition – they benefit from exactly the scenario that weighs on oil and defense stocks.

The challenge is catching the right timing. History shows: Markets often anticipate peace settlements weeks before official announcement. Waiting too long means missing the optimal exit.