Defense Stocks to Gain If Trump Sends Troops to Middle East
U.S. defense players are once again in focus following last week’s attack on two oil tankers in the Gulf of Oman, which added more fuel to the year-long U.S.-Iran tensions. President Trump accused Iran's government on the basis of a video that allegedly showed an Iranian patrol boat removing an unexploded mine from one of the vessels' hulls.
This once again sparked a wave of animosity between the two nations, which are already on the brink of a war with America imposing several sanctions against Iran, especially on oil export. Notably, these sanctions were part of Trump’s initiative to put an embargo on Iran’s missile and nuclear programs and diminish its influence in the Middle East.
Why Send Troops Now?
Tension between the two countries has been rising of late, especially after Trump administration announced termination of all sanction related exemptions granted to some of the Islamic Republic’s biggest oil customers, effective May 2. This drastic step was taken as Iran failed to meet the 12 demands that America laid out earlier for lifting of the sanctions. This resulted in a decline in oil supply, thereby pushing up oil prices in the global market.
In retaliation, Iranian officials threatened to shut down the Strait of Hormuz, situated between Persian Gulf and the Gulf of Oman, which serves as one of the world’s most important passageways for oil transport. While this threat was not put into action by Iran ultimately, the recent attacks on the oil tankers have rattled the international petroleum market and raised the specter of armed conflict in the Middle East.
Now, Trump's national security team is planning to discuss in detail this week whether to send additional U.S. military force to the Middle East in the wake of this assault.
Will This Boost Defense Stocks?
Per a report by CNN, US Central Command sent initial forces to the region in May 2019. According to some defense officials, if any critical situation arises, the U.S. administration will consider sending additional capabilities such as Patriot missile batteries, fighter jets and ships to counter missile firings by Iran. For now, ground combat forces are not part of the discussions.
If the U.S.-Iran conflict intensifies and Trump does send additional military force to the Middle East, it would prove to be beneficial for U.S. defense stocks. In particular, shares of Boeing BA and Lockheed Martin LMT — fighter jet makers, Raytheon RTN — Patriot missile manufacturer, General Dynamics GD and Huntington Ingalls HII — military shipbuilders are expected to benefit if a war breaks out between the United States and Iran.
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