Defense Stocks And Oil Gain As Russia-Ukraine Tension Builds

As tensions escalate between Russia and Ukraine, markets are favoring defense stocks, along with commodities like oil that have moved up.

Feb. 14, 2022

In the case of certain sectors, there is often someone that will benefit regardless of the greater impact that can be caused to societies.

Many companies found their way by developing the infrastructure that contributed to conflict for hundreds of years — and whatever stance you take on that — there will always be a need for countries to protect their borders, and as such, they will be rewarded by markets in times like this.

Markets can be emotionless

You may have noticed, tensions are heating up between Russia and Ukraine, with the U.S. keeping a close eye on things.

If we rewind the history books, there have been several defense companies that have made a name for themselves in this particular event — Boeing, and Lockheed Martin to name a few. Trillions of dollars are spent annually in this sector, and in the U.S. alone, the current defense budget is in the region of $750 billion.

Another industry seeing a strong uptick as pressure mounts are oil, a commodity that has relatively centralized control by a small number of countries. This top-heavy structure of one of the world’s most imported and exported commodities is being affected by a combination of inflationary pressures, increased demand, as well as production constraints right now. Out-of-control oil prices could still go a lot higher and negative consequences could hit economies as a result.

We’d like to think companies that add the most value to society will rise to the top, but the actuality of it all is that markets take a far more calculated approach. We can only hope that these geopolitical factors are resolved as quickly as they have arisen, but as tensions escalate, don’t be surprised to see favorable movement upwards in these sectors as further news unfolds.