“In times of crises, investors can either pre-empt the situation or wait for the markets to react before buying stocks at cheap valuations,” says Thiveyen Kathirrasan, head of research at The Edge Singapore.
War versus pandemic: Different outcomes
Yet, not all crises are created equal. Investors should take the time to understand the nature of the crisis, how long it might last and what kind of value destruction or transfer is taking place, Kathirrasan adds.
The Covid-19 pandemic, for example, caused massive disruptions, but it also enabled shifts in consumption and productivity. During the pandemic, some of the biggest winners were technology companies like Zoom, glove and medical equipment makers as well as vaccine makers.
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However, should the worst happen and a full-scale war breaks out, the value of the entire economy will get destroyed. In that instance, it’s time to liquidate and buy into safe haven assets like gold, silver or asset classes that are not affected by the war. Real estate can be considered an alternative as well.
The stock market is a reflection of the general state and expectations of the economy. In the worst-case scenario, equities are the least attractive asset class, says Kathirrasan.
“If there’s an actual war, everything else gets destroyed. You can’t transfer value elsewhere,” he adds.
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Defence, safe haven assets, real estate and commodities
While the world waits for a resolution, it has to contend with daily updates from the Middle East and America. US President Donald Trump announced a ceasefire to the Israel-Iran war on June 24, and said that the “war is done” between Israel and Iran the next day.
At this point, investors may consider looking at defence-related names such as Lockheed Martin, Northrop Grumman, RTX Corporation and Boeing. Infrastructure companies as well as ancillary companies within the defence industry — such as army uniform manufacturers — may also be worth taking a closer look at.
“Investors should question what kind of resources are going to be scarce after the crisis,” says Kathirrasan. He notes that during Covid, the resources that saw great demand were vaccinations and masks, which led to higher earnings and higher share prices for related companies at the time.
Research is, as always, key. In the case of Boeing, for instance, Kathirrasan recommends investors look at the number of military aircraft the company delivers and what percentage of Boeing’s revenue comes from defence.
For the three months ended March 31, 2025, Boeing’s military revenue under its defence, space & security revenue made up close to a third of its total revenue. In this case, if its stock price went up by just 10%, the stock may be underpriced. Similarly, if a company supplies missiles or drones and its stock hasn’t moved, there could be an opportunity, Kathirrasan adds.
The defence sector could also be a way to position oneself towards the rising demand for military spending.
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In 2024, countries spent some US$2.72 trillion ($3.47 trillion) on military spending, according to the Stockholm International Peace Research Institute. The total sum, which stood 9.4% higher y-o-y, marked the largest annual increase since 1988, and military spending now accounts for 2.5% of the world’s GDP, the report added.
On June 25, members of the North Atlantic Treaty Organization (Nato) also announced that members would spend 5% of their GDP on defence by 2035, up from the previous target of 2%, which was approved at an alliance summit in Wales in 2014. Nato secretary-general Mark Rutte said that the alliance needed to invest more in areas that included “air defence, fighter jets, tanks, drones, personnel, logistics and so much more”.
With this, investors should take a look at defence stocks to examine their roles in the current crisis as well as their level of involvement.
“It’s like trying to write a story,” says Kathirrasan. “Investors should ask: how are countries defending themselves and how much do these companies fit into the story? If their share prices have moved, is this company’s involvement in defence spending enough to justify the movement?”
Measured market response
At the moment, the markets seem to be holding up. The US’s Nasdaq and S&P 500 are nearing all-time highs. As at June 26, the Nasdaq is up by 3.59% to 19,973.55 points year-to-date while the S&P 500 is up by 3.81% to 6,092.16 points. Singapore’s benchmark Straits Times Index (STI) closed 0.56% up at 3,925.98 points on June 25, coming close to its 52-week high of 3,981.57 points.
According to Vasu Menon, managing director, investment strategy at Oversea-Chinese Banking Corporation (OCBC), the market’s initial reaction to the US strike on Iran’s nuclear facilities was more muted than expected. In a note dated June 23, Menon highlighted that Middle East markets ended mostly higher, with Israel’s benchmark index climbing 1.8% and Egypt’s EGX30 gaining 2.7% despite the US’s attacks on Iran on June 22.
“The unfazed response from Middle East markets offers hope that the fallout for other global markets may not be dramatic. Even if global markets see a sharp pullback on Monday, they may not be down and out, and the response may be temporary, and a rebound could materialise eventually,” Menon wrote at the time.
While markets may remain volatile in the short term, the conflict may not be a “game changer” for markets, the OCBC analyst adds.
“Of greater consequence to markets may be the reciprocal tariffs that Trump will decide on by July 9. Trade concerns have taken a backseat due to developments in the Middle East but could re-emerge to the forefront in the coming weeks,” he notes.
Yet, a lot depends on what Iran will do next and if the country will sabotage the supply of oil in the Middle East.
“We will have to wait and watch over the next few days or even a few weeks to see how Iran responds,” says Menon.
Still, the analyst cautions that a more aggressive move by Iran, such as obstructing the Strait of Hormuz, could disrupt 20% of global oil supply and spike prices. This could cause oil prices to increase “sharply” as well as bring about a strong US response, which could hurt the current Iranian leadership and bring about regime change.
However, Menon believes Iran is unlikely to risk this and added that Trump “does not appear to be looking at toppling the current Iranian government for now, only at neutralising its nuclear capabilities”.
Use movements as a filter
According to Menon, investors should prepare for volatility in the “coming days” or even weeks due to the Middle East crisis and tariff uncertainties. That said, these developments may not end the global equity bull market unless inflation surges, causing a global recession.
In Kathirrasan’s view, it is difficult for investors to predict a crisis that may lead to a market crash. Reacting to a crisis with a clear plan is more realistic. “Pre-emptive investing is much harder to get right. But if you’re going to be reactive, you need to have a base-case and a worst-case scenario. Look at companies whose prices have moved the most. Is the movement rational or fear-driven?”
Volatility, in this case, becomes a useful filter. “The right time to enter the market is when it’s volatile enough. The value of a company doesn’t necessarily move every second, but its price usually does. The more volatile a stock is, the greater the potential for a significant gap between its market price and intrinsic value. And that’s where the opportunity lies,” says Kathirrasan.
To Menon, “idle liquidity on the sidelines” means any sharp pullbacks could serve as opportunities to accumulate rather than signals to run for cover.
Bottom-up approach; inaction
When it comes to stock-picking, Kathirrasan prefers a bottom-up strategy instead of taking a top-down or macro view, which can be overwhelming. “Unless you’re a geopolitical expert reading the news every ten minutes, go bottom-up. Understand a company first, then assess how the crisis affects it.”
That could mean reading annual reports, checking revenue breakdowns, and identifying suppliers of key military technologies. “Try not to guess what will happen politically. Focus on companies, not headlines,” he says.
Sometimes, the best action is inaction. “If there’s going to be an all-out war, the general value of the economy is going to go down. So the right move might be to not invest at all,” says Kathirrasan.
In such cases, traditional safe havens like gold may come into play. Menon expects gold prices to rise to US$3,900 an ounce over the next 12 months as global central banks continue to diversify away from the US dollar.
What next?
How the conflict will pan out is anyone’s guess. Yet, it is worth noting that one sector that often gets hit first in any crisis is banking. “No matter what kind of crisis, banks get affected. They reflect the general economy. They’re the financial plumbing behind everything else,” says Kathirrasan.
That also makes them a useful bellwether. If markets fall and banks are sold off indiscriminately, that could present a buying opportunity, especially for long-term investors who expect eventual recovery.
As the dust appears to settle from the recent 12-day war in Iran, much hinges on what happens next. For now, the consensus is clear: Expect volatility, stay grounded in fundamentals, and prepare to act decisively when opportunity presents itself.
