US-Iran Conflict Escalates: Which Stocks Benefit from Geopolitical Tensions

Key Takeaways

• On September 2, 2026, the US and Iran attack each other again, gas prices rise to their highest level in three years, and analysts do not expect a near-term de-escalation.
• In Washington, plans are circulating to increase the US defense budget by around 50 percent to approximately 1.5 trillion US dollars by 2027.
• European defense stocks such as BAE Systems rose temporarily above 5 percent in March 2026 after the US and Israel conducted an attack on Iran on February 28, 2026.
• The Strait of Hormuz, through which approximately 20 percent of global oil transports flow, is considered a critical chokepoint – in March 2026, over 150 tankers waited outside the strait.
• The risk of a significant stock market correction of 15 to 30 percent is elevated according to analysts due to the oil shock from the Iran war, extreme valuations, and tariff pressure.

Fresh Escalation in September 2026

On today, September 2, 2026, the US-Iran conflict has intensified again. The US and Iran are attacking each other, while gas prices have risen to their highest level in three years. Analysts do not believe in a near-term de-escalation and fear rising inflation.

The current course of the conflict is a continuation of the military escalation that began on February 28, 2026. On that day, the US and Israel conducted an attack on Iran, which US President Donald Trump described as a "massive and sustained operation." During the attack, Iran's Supreme Leader Ayatollah Ali Khamenei and other high-ranking regime members were killed. Iran responded with missile and drone attacks on Israel and US military bases in the region.

The military action followed failed nuclear talks between the US and Iran on February 17, 2026, which ended without agreement. Trump stated on February 27 that he was "not satisfied" with the progress of talks. According to the Washington Post, Saudi Arabia and Israel had been pressing Trump for weeks, arguing that Iran would become "stronger and more dangerous" if the US did not act.

Defense Stocks React to Budget Plans

Geopolitical uncertainty is leading to a reassessment of defense stocks. In Washington, plans are circulating to increase the US defense budget by around 50 percent to approximately 1.5 trillion US dollars by 2027. Such a budget increase would substantially fill the order books of defense contractors.

Particularly European defense stocks reacted strongly positively to the military escalation in March 2026. BAE Systems PLC (ISIN: GB0002634946) rose temporarily above 5 percent. Leonardo S.p.A. (ISIN: IT0003856405), Dassault Aviation (ISIN: FR0014004L86), and Kongsberg Gruppen (ISIN: NO0013536151) also recorded gains. Morgan Stanley analysts stated that the conflict would likely be a "central driver" of rising defense spending.

For companies with high US exposure such as BAE Systems, which generates around 45 percent of its sales in the US, this creates an additional multiplier effect. Demand for air and missile defense systems is likely to increase, while geopolitical uncertainty acts as a multiplier: the longer instability persists, the more sustained the budget pressure remains.

Strategic Reasons for Higher Defense Spending

The strategic arguments for higher defense budgets are manifold. The US could shift its focus more strongly toward the Middle East, while Europe would need to expand its independent security policy. Gulf states such as Saudi Arabia and Qatar are also likely to increase their budgets to secure their regional position.

Energy Markets Under Pressure

The Strait of Hormuz is becoming a critical chokepoint. Approximately 20 percent of global oil transports flow through the strait. In March 2026, the prospect of possible disruptions drove ICE gasoil futures prices temporarily above 900 US dollars per ton. Over 150 tankers waited outside the strait. Shipping companies like CMA CGM stopped or rerouted shipments, while insurance premiums for war risks skyrocketed.

In Europe, diesel and heating oil prices rose. In Germany, offerings for middle distillates increased noticeably within hours. Refinery maintenance tightened the situation further.

The recent developments from September 2, 2026 show that the situation has not calmed down. The rising gas prices point to persistent supply concerns. Analysts point to near-term risks: renewed US-Iran conflict, possible attacks on regional oil infrastructure, and disruptions in the Red Sea could lead to supply shocks.

From Geopolitical Risk to Supply Shock

If export terminals, refineries, or production facilities were damaged and passage through Hormuz disrupted for extended periods, the conflict could shift from a geopolitical crisis to a genuine supply shock. Such a supply shock – understood as an abrupt, substantial shortage of physical oil supply on the world market – would drive prices sustainably higher and sharpen inflation dynamics.

Critical Raw Materials as Strategic Lever

While oil and defense stocks react directly to military escalations, strategic attention is shifting to critical minerals in upstream supply chains. High-purity graphite is essential for lithium-ion batteries, high-temperature applications, energy storage solutions, and certain defense technologies.

Focus Graphite Inc. (ISIN: CA34416E8743) is positioning itself with a government-backed pilot program in Canada. In an environment where trade routes such as the Strait of Hormuz are considered vulnerable and geopolitical bloc formation is increasing, the localization of raw material processing outside geopolitically risky regions is gaining importance.

The strategic value of such stocks lies less in the immediate market reaction to military events than in the long-term shift of supply chains. Governments in North America and Europe are attempting to reduce their dependence on regions considered geopolitically unstable.

Risks for Investors

The military escalation between the US, Israel, and Iran marks a geopolitical turning point with immediate effects on commodity markets, sector valuations, and capital flows. The US-Iran conflict forces investors to reconsider their capital allocation, as geopolitical risk displaces artificial intelligence and tariffs as the dominant market narrative.

The risk of a significant correction of 15 to 30 percent is elevated according to analysts. Drivers are the oil shock from the Iran war, extreme valuations – the Shiller CAPE ratio was at 39.8 in July 2026 – tariff pressure, and concerns about AI spending. A March 2026 survey showed that the majority of Americans did not support military action against Iran and feared a protracted conflict, putting the US president under considerable pressure in a year with midterm elections.

The Center for Strategic & International Studies reported in March 2026 that US military presence "lacked the size and capabilities for major combat operations or regime change," which would require ground troops. With the forces present at that time, an engagement duration of around one week was expected. Trump hinted at this timeframe, stating that "the bombings would continue nonstop throughout the week or for as long as necessary."

Assessment for Individual Investors

For individual investors in German-speaking regions, a complex picture emerges. Defense stocks, energy stocks, and raw material stocks react in different ways to geopolitical tensions. Defense stocks benefit from rising budgets and long-term order books. Energy stocks heavily depend on the development of oil and gas prices, which in turn are determined by escalation dynamics. Critical raw material stocks play a more long-term strategic role in supply security.

The current situation on September 2, 2026 shows that the conflict is not subsiding. Investors should incorporate geopolitical risk as a permanent factor in their portfolio planning without relying on short-term speculation. Uncertainty remains high, and forecasts about the further course of events are fraught with considerable unknowns.