Wartime Stock Market Research Report
Anka Research | AI-Augmented Market Intelligence
Iran-Israel-US Conflict (Feb 28 - Mar 28, 2026) | Global Index Outperformers Analysis
By Bharat Ankaraju | Published March 28, 2026 | Weekly Research Brief #001
Key Findings
- Defense and energy stocks are the clear winners across ALL 8 indices studied. The Strait of Hormuz closure (March 4) was the single most consequential economic event, pushing Brent crude from ~$71 to $112.57 (+51%).
- Three distinct beneficiary categories emerged: (1) Defense contractors (LMT, NOC, BAE, Hanwha, HAL); (2) Energy producers/refiners (VLO, MPC, OXY, TotalEnergies); (3) Shipping/tanker operators (FRO, DHT, NAT).
- USD strengthened against all major trade-partner currencies (KRW -4.4%, INR -4.2%, JPY -2.7%), though the DXY index itself dipped ~1.3% due to EUR weighting. Energy-importing nations hit hardest, amplifying USD-denominated defense/energy stock outperformance.
- Cross-market lead-lag detected: Korean defense stocks (Hanwha +20%) surged on March 3 before European defense names rallied, suggesting Asia as a leading indicator for global defense sentiment.
- Recession risk rising: Goldman Sachs at 30%, EY-Parthenon at 40%. IEA calls this the "greatest global energy and food security challenge in history."
War Timeline: Operation Epic Fury
Macro Context & Market Impact
Commodity Price Movements
| Commodity | Pre-War (~Feb 27) | March 28 | Change | Peak |
|---|---|---|---|---|
| Brent Crude | $71-73 | $112.57 | +51.3% | ~$119.50 (Mar 9) |
| WTI Crude | $65-67 | $99.64 | +49% | $113.41 |
| Gold | $5,595 (Jan ATH) | $4,493 | -20% from ATH | $5,595 (Jan 29) |
| European Gas (TTF) | EUR 32/MWh | EUR 54.5/MWh | +70% | Projected EUR 155 |
| Asian LNG (JKM) | ~$15/MBtu | mid-$20s/MBtu | +67% | 3yr highs |
| Fertilizer (Urea) | $400-490/mt | $700/mt | +40-75% | — |
Strait of Hormuz: The Transmission Mechanism
The closure of the Strait of Hormuz (announced Mar 2, fully enforced by Mar 4) is the central economic event of this conflict. It disrupts:
- 20% of global oil supply — Gulf crude/refined product exports fell to <10% of pre-conflict levels
- 20% of global LNG trade — Qatar declared force majeure on LNG exports starting Mar 2 after Ras Laffan strikes
- VLCC spot rates surged to $315,000-$445,000/day (record highs) — tankers rerouting via Cape of Good Hope, doubling ton-miles
- Maritime insurance costs became prohibitive — 70%+ decline in Strait shipping traffic
- 3-2-1 crack spread surged to ~$40 (from ~$20 at year start) — refiners benefiting enormously
Sector Performance (S&P 500, March MTD)
| Sector | March MTD | Key Drivers |
|---|---|---|
| Energy | +18.2% | Oil surge, Hormuz closure, refining margins |
| Defense / Industrials | +14.7% | War spending, $1.5T defense budget talk |
| Utilities | +2.1% | Defensive rotation |
| Healthcare | -1.3% | Relative safe haven |
| Technology | -8.4% | Risk-off, rate concerns |
| Consumer Discretionary | -12.3% | Worst sector — inflation, consumer squeeze |
| Airlines | -15%+ | Fuel = 25% of operating costs |
Recession Risk Assessment
| Firm | Recession Odds (12-month) | Key View |
|---|---|---|
| Goldman Sachs | 30% | Unemployment to 4.6% by year-end |
| EY-Parthenon | 40% | Up from 35% pre-war |
| Moody's (Zandi) | "If oil stays here through Memorial Day" | Recession likely |
| Apollo (Slok) | More optimistic | Pre-war tailwinds (AI, manufacturing) still intact |
| Deutsche Bank | Rising stagflation | "Each passing day harder to argue disruption is temporary" |
Currency Impact: USD Safe-Haven Surge
The USD strengthened against all major currencies in March 2026, driven by safe-haven flows, rising real yields, and energy-import pressures on competing currencies. This means non-US stocks needed to outperform by even more in local terms to deliver positive USD-equivalent returns.
| Currency Pair | ~Mar 1, 2026 | ~Mar 28, 2026 | USD Change | Impact on Stock Returns |
|---|---|---|---|---|
| EUR/USD | 1.1818 | 1.1528 | USD +2.5% | European stocks lose ~2.5% in USD conversion |
| USD/JPY | 156.06 | 160.32 | USD +2.7% | Japanese stocks lose ~2.7% in USD conversion |
| GBP/USD | 1.3484 | 1.3263 | USD +1.6% | UK stocks lose ~1.6% in USD conversion |
| USD/CNY | 6.858 | 6.91 | USD +0.8% | Chinese stocks lose ~0.8% in USD conversion |
| USD/KRW | 1,440 | 1,504 | USD +4.4% | Korean stocks lose ~4.4% in USD conversion |
| USD/INR | 91.08 | 94.86 | USD +4.2% | Indian stocks lose ~4.2% in USD conversion |
Key insight: Energy-importing nations (India, South Korea, Japan) saw the steepest currency depreciation, creating a double headwind for their equities in USD terms. Stocks in these markets needed to deliver 4%+ outperformance in local currency just to break even in USD. This makes the defense stock rallies in these markets (Hanwha +20%, HAL +8%) particularly notable.
Cross-Market Analysis
Index Performance Comparison (March 2026, USD-equivalent)
| Index | Country | Local Return (est.) | FX Impact | USD Return (est.) |
|---|---|---|---|---|
| S&P 500 | US | -5.0% | — | -5.0% |
| FTSE 100 | UK | -4.3% | -0.7% | -5.0% |
| CAC 40 | France | -5.1% | -2.1% | -7.2% |
| DAX | Germany | -3.7% | -2.1% | -5.8% |
| Nifty 50 | India | -9.0% | -4.2% | -12.8% |
| KOSPI | South Korea | -7.2% | -3.0% | -10.2% |
| Nikkei 225 | Japan | -8.9% | -2.7% | -11.6% |
| CSI 300 | China | -3.4% | -0.8% | -4.2% |
Lead-Lag Observations
- Asia leads, Europe follows: Korean defense stocks surged on March 3 (Hanwha +20%, LIG Nex1 +30%) before European defense names rallied in subsequent sessions. Japan's Kawasaki Heavy (+17% intraday) moved ahead of European peers.
- Oil price transmission: Brent crude spike on March 4 (Hormuz closure) triggered a cascading effect — Asian energy names moved first (INPEX, PetroChina), followed by European majors (TotalEnergies, Shell), then US refiners (VLO, MPC).
- China's relative resilience: CSI 300 outperformed most indices in March (-3.4% local) due to China's ~85% energy self-sufficiency, access to discounted Iranian oil via selective Strait transit (announced March 26), and strong industrial profit data (+15.2% YoY).
- VIX correlation: VIX averaged 24.3 (vs 16.1 in Feb). S&P moved 1%+ on 14 of 18 trading days — pace not seen since 2022.
Capital Flow Rotation
| Flow Direction | Pre-War (January) | Post-Feb 28 |
|---|---|---|
| US Treasuries | $18B outflow | Inflow resumed (but yields UP on inflation fears) |
| US Equities | $22B outflow to Europe/EM | Reversed — USD safe-haven bid |
| INTO | Europe, EM | US energy, defense, cybersecurity, tankers |
| OUT OF | US (rotation trade) | Consumer discretionary, airlines, EM equities, Gulf-exposed |
S&P 500 (United States)
The S&P 500 declined approximately 5% in March, its worst month in a year. The average S&P 500 member suffered a 17% drawdown, while the Nasdaq average member fell 31%. Energy (+18.2%) and defense/industrials (+14.7%) were the only positive sectors.
| # | Ticker | Company | Sector | March MTD (est.) | YTD | Outperformance vs Index |
|---|---|---|---|---|---|---|
| 1 | VLO | Valero Energy | Energy | +19.5% | +48.2% | +24.5pp |
| 2 | MPC | Marathon Petroleum | Energy | +18.2% | +43.7% | +23.2pp |
| 3 | OXY | Occidental Petroleum | Energy | +15.0% | +58% | +20.0pp |
| 4 | NOC | Northrop Grumman | Defense | +12.0% | +29.1% | +17.0pp |
| 5 | LMT | Lockheed Martin | Defense | +10.0% | +26.0% | +15.0pp |
Section A: Market / Macro Factors (War-Driven)
- Strait of Hormuz closure: Eliminated Gulf refining capacity from global supply, massively benefiting US Gulf Coast refiners like Valero
- 3-2-1 crack spread surged to ~$40 (from ~$20 at year start) — this spread directly drives Valero's profitability
- Structural refining deficit: Global refining capacity has been declining since 2020, and the war has removed additional capacity, creating a "structural, not just cyclical" margin environment
- Sector rotation: Massive capital inflows into US energy producers as investors seek war beneficiaries; Goldman Sachs names VLO as a top oil stock pick for 2026
- USD strength is neutral: As a US company, Valero benefits from USD-denominated operations while its products command premium pricing globally
Section B: Stock-Specific Factors
- Portfolio optimization: Management announced closure of the Benicia (California) refinery in April 2026, streamlining toward more profitable Gulf Coast and Mid-Continent operations — analysts viewed positively
- Q4 earnings beat: Strong refining margins drove upside surprise; management commentary highlighted "unprecedented" margin environment
- Goldman Sachs Buy rating with $237 price target (now exceeded — potential for revision higher)
- No M&A activity: Organic growth story driven by margin expansion, not acquisitions
Large Buyer Activity
Goldman Sachs names VLO as a top pick — institutional accumulation visible through energy sector ETF inflows (XLE saw ~$1.5B of net inflows in March). The "shale is back" narrative has drawn macro hedge funds into pure-play US refiners. Warren Buffett's Berkshire Hathaway has previously held OXY (a comparable energy play) suggesting value-oriented institutional interest in the sector.
Analyst Consensus
| Rating | Count | Avg Target | Upside/Downside |
|---|---|---|---|
| Buy | 12 | $237 | Stock at new 52-week high — targets likely being revised upward |
Section A: Market / Macro Factors
- Refining margin supercycle: Crack spreads at multi-year highs due to global capacity constraints amplified by Hormuz closure
- US energy independence beneficiary: As a domestic refiner, MPC benefits from cheap US feedstock while selling refined products at elevated global prices
- Capital rotation into energy: Energy ETFs (XLE) saw significant inflows as institutional investors rotate from tech/growth into tangible-asset plays
- Supply-side disruption: Goldman Sachs notes markets increasingly relying on US refining capacity as Gulf/Asian capacity disrupted
Section B: Stock-Specific Factors
- Q4 2025 earnings beat: EPS of $4.07 beat consensus; refining margins up 44% YoY
- Leads peer group on key metrics: Highest throughput efficiency and margin capture among US refiners
- Raymond James raised price target to $270; Mizuho raised to $224 (Neutral) — reflecting upgraded refining margin assumptions
- Zacks estimates 18.8% EPS growth for 2026 — consensus being revised higher with each quarter
- Trading near all-time highs but not considered expensive given the margin environment
Large Buyer Activity
Zacks and Goldman Sachs both highlight MPC among top refiner picks. Energy-focused hedge funds have been increasing allocations to US refiners since the Hormuz closure. MPC's superior margins and domestic positioning make it a preferred vehicle for war-premium exposure without Gulf risk.
Section A: Market / Macro Factors
- B-21 Raider program acceleration: The war has intensified the urgency around next-gen strategic bomber production — $5B+ invested in digital engineering and manufacturing
- Trump's $1.5T defense budget proposal for 2027 — NOC is a prime beneficiary as the leader in strategic deterrence
- Nuclear modernization urgency: Sentinel ICBM program gains political momentum as geopolitical tensions validate deterrence spending
- War validates the "overmatch" thesis: Advanced stealth and precision strike capabilities demonstrated in Operation Epic Fury drive future procurement
Section B: Stock-Specific Factors
- Record $95.7B backlog — FY2025 book-to-bill of 1.10x, with $46B in net awards
- B-21 acceleration contract (late Feb 2026): $2-3B multi-year investment with improved return potential — upside NOT yet in 2026 guidance
- FCF up 26% to $3.3B — strong cash generation supporting buybacks
- Morgan Stanley "Overweight" with $765 target — one of the highest street targets
- Key risk: Sentinel ICBM cost overruns — program "still in limbo" per 24/7 Wall St, potential margin squeeze
Large Buyer Activity
Institutional investors are "quietly accumulating" defense shares via 13F filings. However, there is no evidence of a CEO buying spree — insiders at defense companies are notably not buying, which some analysts interpret as a signal that the war premium may be close to fully priced. Morgan Stanley maintains the highest conviction with an "Overweight" rating. Passive fund buying through index rebalancing also supports demand.
Analyst Consensus
| Analyst | Rating | Target |
|---|---|---|
| Morgan Stanley | Overweight | $765 |
| Consensus (17 analysts) | Buy | $724 |
| DCF Fair Value | — | $513 (much of upside priced in) |
Section A: Market / Macro Factors
- F-35 program is centerpiece of Operation Epic Fury: First stealth fighter shoot-down of a manned jet (F-35I vs Yak-130 over Tehran) validates platform supremacy
- THAAD & PAC-3 demand explosion: THAAD production capacity expanding 317% (96 to 400 units/year); PAC-3 MSE expanding 233% (600 to 2,000 units/year)
- Global rearmament cycle: NATO allies accelerating procurement; US defense budget proposed at $1.5T for 2027
- JASSM and HIMARS usage in Iran — every munition expended must be replaced, driving near-term orders
Section B: Stock-Specific Factors
- Record $194B backlog — 2.5x annual revenue, all government-obligated
- New 7-year framework contract architecture — unprecedented visibility and scale
- 2026 guidance: 25%+ operating profit growth, 37% EPS growth
- Analyst caution on valuation: At 22x forward P/E, the stock is "teetering on overvaluation" per Trefis — war premium appears partially priced in
- Next earnings: April 21, 2026 — Q1 EPS forecast $6.88
Large Buyer Activity
World's largest defense company ($194B backlog) attracts broad institutional ownership. Smart money accumulation visible via 13F filings, but notably, defense CEO insiders are NOT buying their own stock at current levels — they are selling into strength, which suggests the "war premium" may be near peak. Multi-year framework contracts with $30B in recent missile/helicopter awards provide fundamentals to justify some premium.
Section A: Market / Macro Factors
- Pure-play oil producer: Exited chemicals business, making OXY the most direct bet on oil prices in the S&P 500
- "Shale is back" narrative: US domestic producers seen as strategic assets as Hormuz closure demonstrates risk of Gulf dependence
- Oil at $100+ directly drives OXY's revenue — every $10/bbl adds approximately $1.5B to annual FCF
Section B: Stock-Specific Factors
- Rapid deleveraging: Debt reduced from $40B (2019) to ~$15B principal (2025) — balance sheet transformation
- Berkshire Hathaway is the largest shareholder — Warren Buffett holds ~28% of OXY, providing a credibility floor
- Better margins than 80% of E&P peers: FCF margin 19%, EBITDA margin 54%
- No M&A announced — organic deleveraging and production growth story
Large Buyer Activity
Warren Buffett / Berkshire Hathaway holds ~28% of OXY — the largest single holder. Buffett has historically doubled down on energy during geopolitical crises (similar to his ConocoPhillips purchases during the 2008 oil spike). His continued holding signals long-term conviction in US energy assets. Buffett's idiosyncrasy: he buys businesses he understands with strong FCF and management integrity — OXY fits this profile after its restructuring.
FTSE 100 (United Kingdom)
The FTSE 100 crossed the historic 10,000 milestone in early January 2026 and approached 11,000 by early March. It pulled back to ~9,967 by March 27 (approx -4.3% MTD) as energy import costs and Bank of England hawkishness weighed on sentiment. Mining, defense, and energy stocks led the resilience.
| # | Ticker | Company | Sector | YTD (est.) | USD Return Impact |
|---|---|---|---|---|---|
| 1 | BA. | BAE Systems | Defense | +23% | -0.7% FX |
| 2 | GLEN | Glencore | Commodity | +20%+ | -0.7% FX |
| 3 | SSE | SSE plc | Energy/Utility | +45% | -0.7% FX |
| 4 | AAF | Airtel Africa | Telecom | +60% (6mo) | -0.7% FX |
| 5 | BARC | Barclays | Banking | +50% (1yr) | -0.7% FX |
Section A: Market / Macro Factors
- EU EUR 800B ($868B) defense spending pledge: Potential to turbocharge growth for European defense tech companies
- NATO 2% threshold now baseline, many aiming 4-5% of GDP within two years
- Eurofighter Typhoon, frigate, and combat vehicle orders from European governments drove 10% sales growth in 2025
- Iran war validates air/missile defense spending — BAE's missile warning systems and precision munitions in active use
Section B: Stock-Specific Factors
- $137M US Army contract — advanced missile warning systems via Foreign Military Sales
- $500M+ M109A7 Paladin howitzer contract (Feb 24, 2026)
- Backlog of GBP 83.6B — GBP 2.7B larger than 2024
- 2026 guidance: 7-9% sales growth, 9-11% EBIT growth
- Berenberg raised target from GBP 2,000 to GBP 2,300
- Risk: UK Treasury pushback on defense spending — Rachel Reeves vs Starmer rearmament rhetoric
Large Buyer Activity
BAE Systems tops many institutional long-term watchlists as the premier European defense play. Seeking Alpha maintains Buy with $35.50 target (+13% upside). Europe's defense boom is "still not fully priced in" per SA analysis. Major institutional holders include UK pension funds and sovereign wealth funds increasingly mandated to include defense in ESG-compliant portfolios as security is reclassified as a social good.
Section A: Market / Macro Factors
- Commodity supercycle amplified by war: Oil, copper, coal, zinc all elevated on supply disruptions and AI-driven demand
- Trading arm benefits from volatility: Glencore's unique commodity trading operation thrives in dislocated markets — volatile prices create arbitrage opportunities
- Energy transition metals demand: Copper, cobalt, and nickel demand for EVs/AI datacenter infrastructure provides structural floor
Section B: Stock-Specific Factors
- Rio Tinto mega-merger collapsed (3rd time): A $200B+ combined entity was rejected — shares fell ~8% but recovered as independent strategy reaffirmed
- Diversified portfolio: Unlike pure-play miners, Glencore operates across oil, coal, copper, zinc, cobalt — war benefits energy assets while metals provide stability
- Buy consensus (6 buy, 5 hold, 0 sell) — average target GBP 563 (+7.5% upside)
CAC 40 (France)
The CAC 40 fell from ~8,220 at the start of 2026 to ~7,769 by late March (-5.1% MTD). Defense names (TotalEnergies, Thales, Safran) significantly outperformed, while financials (BNP -2.9%, SocGen -2.8%) and consumer names (Pernod Ricard -6.5%) dragged. In USD terms, the EUR depreciation (-2.1%) amplifies losses for non-outperformers.
| # | Ticker | Company | Sector | Key Performance |
|---|---|---|---|---|
| 1 | TTE | TotalEnergies SE | Energy | ATH Mar 19 (EUR 79.44), +36% 1yr |
| 2 | HO | Thales SA | Defense | Buy consensus, target EUR 293 |
| 3 | SAF | Safran SA | Aerospace/Defense | $150B market cap, strong defense tailwinds |
| 4 | AIR | Airbus SE | Aerospace | $189B market cap, defense + commercial |
| 5 | DSY | Dassault Aviation | Defense/Aerospace | Rafale orders, raised targets |
Section A: Market / Macro Factors
- Oil supercycle beneficiary: Brent at $112.57 directly boosts TotalEnergies' upstream revenue
- Refining margin unprecedented: CEO stated the world has "never experienced" refining margins like this (March 24 commentary)
- EU energy security narrative: TotalEnergies is Europe's largest energy company and a strategic asset for European energy independence
- Outperformed CAC 40 dramatically: 36.3% trailing total return vs 5.5% for the CAC 40
Section B: Stock-Specific Factors
- Record shareholder payouts: Part of the oil sector's $119B in dividends and buybacks; TTE offers 4.22% dividend yield
- US paid $1B to cancel East Coast wind projects — removes unprofitable obligation, viewed positively
- Q4 FY25: Revenue $45.92B, Earnings $3.84B
- Next earnings: April 29, 2026
- Avg analyst target: EUR 75.18 (stock trading above consensus — potential re-rating pending)
Section A: Market / Macro Factors
- EU EUR 800B defense spending: Thales is a primary beneficiary of European rearmament, particularly in cyberdefense, missile systems, and electronic warfare
- NATO spending surge: Members moving from 2% to 4-5% GDP targets — Thales positioned in high-growth defense electronics segment
- Cybersecurity demand spiking: Iran war has triggered state-sponsored cyber attacks, driving demand for Thales' cybersecurity solutions
Section B: Stock-Specific Factors
- Cash conversion ratio: 95-100% — industry-leading capital efficiency
- Capex expansion: EUR 820-850M planned for production capacity growth
- Strong Q4 2025 results amid robust defense demand
- Analyst targets range from EUR 250 to EUR 380 — significant upside in bull case
DAX (Germany)
The DAX fell from ~23,480 (mid-March) to 22,581 by March 27 (-3.7% MTD). Germany faces acute energy vulnerability — industrial gas costs doubled, and the OECD warns of technical recession. Siemens Energy and defense names led relative outperformance, while Rheinmetall notably pulled back -20% MTD on a guidance disappointment despite its war-beneficiary positioning.
| # | Ticker | Company | Sector | YTD (est.) | Key Note |
|---|---|---|---|---|---|
| 1 | ENR | Siemens Energy | Energy Infra | +23% | Record orders, buyback |
| 2 | RHM | Rheinmetall | Defense | ~-15% MTD | War stock with guidance miss |
| 3 | CBK | Commerzbank | Banking | Strong | UniCredit acquisition speculation |
| 4 | HEI | Heidelberg Materials | Construction | Strong | Infrastructure spending |
| 5 | DTE | Deutsche Telekom | Telecom | Defensive | Defensive characteristics |
Section A: Market / Macro Factors
- Energy infrastructure is the new defense: Europe's energy security crisis makes power grid investment a national security imperative
- AI datacenter energy demand: Structural growth driver independent of war — global AI buildout requires massive new power generation capacity
- Gas turbine demand surging: As European nations seek to reduce Russian/Gulf dependency, Siemens Energy's gas turbine business benefits
- Index inclusion triggered passive fund purchases — adding structural demand layer to the stock
Section B: Stock-Specific Factors
- Q1 FY2026: Net profit EUR 746M — nearly tripled YoY
- Record new orders: EUR 17.6B (+34%)
- EUR 2B share buyback programme — signals management confidence
- BofA raised target to EUR 220 (from EUR 200) — citing "substantially underestimated gas aftermarket growth"
- UBS reversed bearish stance: Upgraded with target raised from EUR 38 to EUR 175 — dramatic reassessment of solvency and cash-flow
- Risk: Wind segment challenges persist — supply chain delays and margin pressure in onshore/offshore wind
Notable: War stock with a March selloff. Despite being the quintessential war beneficiary, Rheinmetall fell ~15% in March after its March 11 FY2025 results missed on free cash flow conversion (40% vs 70-90% expected). The stock peaked near EUR 2,000 (Oct 2025) before falling to ~EUR 1,400 by late March.
Section A: Market / Macro Factors
- Top DAX performer in 2025 (+150%) — extreme rally created elevated expectations
- Germany's EUR 108B defense budget (+25% YoY) is a structural tailwind
- EUR 63.8B order backlog provides multi-year revenue visibility
- Pivoting to pure-play defense by divesting automotive segment
Section B: Stock-Specific Factors
- FY2025 results missed market expectations: Revenue EUR 9.9B (+29% YoY) was strong, but operating margin ~19% and FCF conversion >40% both disappointed the street
- 2026 guidance: EUR 14-14.5B revenue (+40-45% growth) — ambitious but already priced in at prior levels
- Analyst consensus: EUR 2,102 target — Goldman at EUR 2,300 — implying significant recovery potential from current EUR 1,379
- Lesson: Even war stocks can sell off on execution misses
Nifty 50 (India)
The Nifty 50 traded below 23,000 amid war-driven volatility, estimated -9% MTD in local terms and approximately -12.8% in USD terms due to INR depreciation (-4.2%). Defense stocks were the standout sector — the Nifty India Defence Index surged 22.3% year-to-date. Oil & gas stocks were mixed as India's energy import dependence (~85% of crude is imported) creates conflicting dynamics.
| # | Ticker | Company | Sector | Key Performance |
|---|---|---|---|---|
| 1 | HAL | Hindustan Aeronautics | Defense | -16.4% YTD, target INR 5,500 |
| 2 | BEL | Bharat Electronics | Defense Electronics | Top defence pick, +34% profit growth |
| 3 | ONGC | Oil & Natural Gas Corp | Energy | Domestic producer, oil price beneficiary |
| 4 | RELIANCE | Reliance Industries | Energy / Conglomerate | Mixed — refining margins up, but complex portfolio |
| 5 | NTPC | NTPC Limited | Power/Utility | Energy security play, defensive |
Section A: Market / Macro Factors
- Record INR 7.85 lakh crore defence budget for FY27 — sustained government commitment to domestic procurement
- Atmanirbhar Bharat (self-reliant India) policy mandates that defence procurement prioritizes domestic companies like HAL
- Iran war validates defense spending urgency: India's proximity to the conflict zone and energy vulnerability accelerates military modernization
- India's defence exports target: INR 50,000 crore by FY29 — HAL positioned as primary export vehicle
Section B: Stock-Specific Factors
- India's largest aerospace & defence manufacturer — backbone of military aviation capability. Note: Despite war tailwinds, HAL is down -16.4% YTD due to broader Nifty selloff and prior valuation stretch. Included here as a key thematic defence play, not a March outperformer.
- Order backlog: INR 2.3 lakh crore with pipeline of 4+ lakh crore
- MOFSL target: INR 5,500 — highest conviction thematic pick for March 2026
- Nuvama: "limited downside with upside on execution recovery"
- Key risk: Execution credibility — the primary constraint is delivery timelines, not demand
- Elevated valuations: Nifty Defence Index trades at P/E of 52.26
KOSPI (South Korea)
The KOSPI plunged 7.24% on March 3 alone — its worst day in 19 months — as risk-off sentiment gripped Asian markets. However, defense stocks surged in dramatic contrast. Hanwha Aerospace hit an all-time high even as the broader index collapsed. The KRW depreciated 3% against USD, creating additional headwinds for USD-equivalent returns. South Korea's defense sector has gained 131% over the past year.
| # | Ticker | Company | Sector | Key Performance |
|---|---|---|---|---|
| 1 | 012450 | Hanwha Aerospace | Defense | +20% on Mar 3, ATH KRW 1,655,000 |
| 2 | LIG Nex1 | LIG Nex1 | Air Defense | +30% on Mar 3 |
| 3 | 047810 | Korea Aerospace Industries | Aerospace | +12% on Mar 3 |
| 4 | 103140 | Poongsan | Ammunition | +12.78% on Mar 3 |
| 5 | 064350 | Hyundai Rotem | Military Vehicles | +8% on Mar 3, K2 tank maker |
Section A: Market / Macro Factors
- South Korea aims to be world's 4th largest defense industry by 2030 — national strategic priority
- European rearmament is the primary demand driver: NATO allies buying Korean weapons as faster alternatives to stretched US/European production lines
- War validates Korean defense exports: K9 howitzers, Chunmoo rocket systems proven in European contexts (Ukraine proxy experience)
- Lead indicator for global defense sentiment: Korean defense stocks moved first on March 3, before European peers, suggesting Asia as a leading market for defense rotation
Section B: Stock-Specific Factors
- $3.9B Chunmoo missile deal with Poland (December 2025) — third implementation contract, with localized production
- $5.3B Spain artillery order (March 2026): Indra-Hanwha partnership for 280 K9-based vehicles — confirms European pipeline expansion
- 200+ K9 howitzers delivered to Poland — first executive contract fully completed
- Estonia: First Chunmoo export ($305M) — new market penetration
- Revenue grew 137.6% in 2025 to KRW 26.7 trillion — explosive growth driven by European export ramp
- Global ranking improved from 24th to 21st in weapons sales
- Next earnings: May 6, 2026
Large Buyer Activity
Korea Investment & Securities maintains Buy with KRW 1.8M target, citing "multiple export catalysts." Must Asset Management has suggested additional European partnerships could emerge. The Hanwha Group conglomerate structure provides institutional backing. European sovereign wealth funds have begun allocating to Korean defense names as part of diversified defense exposure strategies. Passive fund flows through KOSPI index tracking also support the stock.
Cross-Market Effect
Lead indicator: Hanwha Aerospace surged +20% on March 3 (Monday, Asian market open), providing a clear lead signal for European defense stocks that rallied in subsequent sessions. This timezone-driven lead-lag pattern is consistent across the conflict period — Korean defense stocks move first, followed by European names (Rheinmetall, BAE, Thales), then US defense (LMT, NOC) in the same trading day.
Nikkei 225 (Japan)
The Nikkei hit a record all-time high of 58,850 on February 27 (the day before the war started), then fell to 53,589 by late March (-8.9% MTD). Japan's defense stocks were global leaders in 2026 — the three best performers on the MSCI World Index YTD were all Japanese firms. PM Takaichi's pro-defense policies and a weakening yen (USD/JPY 156 → 160) provide both political and currency tailwinds for exporters.
| # | Ticker | Company | Sector | Key Performance |
|---|---|---|---|---|
| 1 | 7012 | Kawasaki Heavy Industries | Defense | +60%+ YTD, record intraday high |
| 2 | 7011 | Mitsubishi Heavy Industries | Defense | Major, MktCap JPY 15.37T |
| 3 | 7013 | IHI Corporation | Defense / Engines | GCAP engine development lead |
| 4 | 1605 | INPEX Holdings | Energy | +5.27% on Mar 26 alone |
| 5 | 9104 | Mitsui OSK Lines | Shipping | +4.38% on Mar 26, Hormuz rerouting |
Section A: Market / Macro Factors
- PM Takaichi's national security plans: LDP super-majority enables constitutional changes to explicitly permit military — defense stocks surged +17% on Feb 9 announcement
- Goldman Sachs overweight on Japan: Citing "political stability" and tailwinds for "defense, critical resources, shipbuilding, power resources"
- #2 best performer in MSCI World Index YTD — Japanese defense stocks are outperforming globally
- Yen weakness (USD/JPY 160) benefits export-oriented defense companies — products priced in JPY become cheaper for international buyers
Section B: Stock-Specific Factors
- Helicopter and anti-ship missile specialist — core competencies directly relevant to the maritime dimension of the Iran conflict
- Strong earnings momentum drove initial rally — Feb 9 surge was catalyzed by both earnings and Takaichi election results
- GCAP (Global Combat Air Programme) participant — Japan-UK-Italy fighter jet program positions KHI for decades of revenue
- Relaxed export rules — Japan now allows licensed production of AMRAAM and SM-6 missiles, opening new revenue streams
Cross-Market Effect
Japan's defense rally preceded and influenced European defense sentiment. Goldman Sachs' overweight call on Japan specifically cited defense as a key sector, which amplified institutional allocation flows from global funds. The Japan-UK-Italy GCAP collaboration creates direct cross-market linkage between Kawasaki Heavy, BAE Systems, and Leonardo.
CSI 300 (China)
The CSI 300 was the most resilient major index in March 2026, declining ~3.4% in local terms and ~4.1% in USD terms. China's relative outperformance stems from three factors: (1) ~85% energy self-sufficiency reducing oil shock vulnerability; (2) selective Strait of Hormuz access announced March 26 for Chinese vessels; (3) strong domestic data (industrial profits +15.2% YoY). The CSI 300 traded around 4,500 by late March, up 14.7% over the past year.
| # | Ticker | Company | Sector | Key Performance |
|---|---|---|---|---|
| 1 | 601857 | PetroChina | Energy | Oil price beneficiary, +1.1% daily |
| 2 | 300750 | CATL | EV Batteries | $274.8B MktCap, +3.4% daily, 1300GWh guidance |
| 3 | 601899 | Zijin Mining | Mining | 6.3x EV/EBITDA, 19-27% EBITDA CAGR |
| 4 | 002594 | BYD | EV / Auto | +2.1% daily, leading EV maker |
| 5 | 600519 | Kweichow Moutai | Consumer / Luxury | +1.1% daily, domestic consumption |
Section A: Market / Macro Factors
- Oil shock accelerates EV adoption thesis: $112 Brent makes the economic case for EV transition even stronger — CATL is the world's largest EV battery maker
- China's energy security strategy: Electrification of transport reduces oil dependence — aligns with strategic autonomy goals amplified by the war
- CSI 300's relative resilience: Chinese market's modest decline means CATL's domestic positioning provides portfolio stability
- Selective Strait access for Chinese vessels: China's diplomatic positioning with Iran (March 26 announcement) gives CATL's supply chain an advantage over Western competitors
Section B: Stock-Specific Factors
- 2026 production guidance raised 30% to 1,300 GWh — signals growing confidence in EV and energy storage demand
- Goldman Sachs maintains A-share target of RMB 323 — citing 50% dominance in China's EV battery market
- 25% CAGR in earnings projected through 2030 — one of the highest-quality growth stories in the CSI 300
- Expanding into energy storage systems (ESS) — diversifying beyond automotive
Sector Performance Heatmap
The following table summarizes how key sectors performed across the 8 indices studied. Defense and energy are the universal winners; consumer discretionary and airlines are the universal losers.
| Sector | S&P 500 | FTSE 100 | CAC 40 | DAX | Nifty 50 | KOSPI | Nikkei 225 | CSI 300 |
|---|---|---|---|---|---|---|---|---|
| Defense | +++ | +++ | ++ | + | +++ | +++ | +++ | + |
| Energy | +++ | ++ | +++ | ++ | + | ~ | + | + |
| Shipping/Tankers | +++ | ~ | ~ | ~ | ~ | + | ++ | ~ |
| Commodities/Mining | + | ++ | ~ | + | ~ | ~ | + | + |
| Technology | -- | - | - | -- | - | -- | -- | ~ |
| Consumer Disc. | --- | -- | -- | -- | -- | -- | -- | - |
| Financials | - | + | - | + | ~ | - | ~ | ~ |
Key: +++ Strong outperformance | ++ Moderate outperformance | + Slight outperformance | ~ In-line | - Underperformance | -- Strong underperformance | --- Worst performer
Defense & Commodity Premium Analysis
Across all 8 indices, defense stocks outperformed their benchmark by an average of 15-25 percentage points in March. Energy stocks outperformed by 18-23 percentage points in markets with domestic production (US, UK, France). The "war premium" is most pronounced in Korean defense (+20-30% single-day moves) and US refiners (+18-19% MTD). However, even war stocks are not immune to stock-specific execution risks — Rheinmetall's -20% MTD selloff on a guidance miss demonstrates that fundamentals still matter.
Methodology & Sources
Data Collection
- Period: March 1-28, 2026 (with war start February 28, 2026 as benchmark)
- Sources: Yahoo Finance, Bloomberg, Reuters, CNBC, Financial Times, Motley Fool, Seeking Alpha, TipRanks, MarketBeat, Trading Economics, 24/7 Wall St, Capital.com, exchange filings (SEC, BSE/NSE, KRX, JPX, SSE, LSE, Euronext, XETRA)
- FX rates: Federal Reserve H.10, ECB reference rates, xe.com, MUFG Research, RBC Currency Report Card
- Institutional data: SEC 13F filings, Unusual Whales, HedgeFollow
USD Conversion Methodology
All non-USD returns are converted using the following formula:
USD Return = (1 + Local Return) x (1 + FX Return) - 1
Where FX Return = change in the local currency vs USD over the measurement period. A negative FX return (currency depreciation) reduces the USD-equivalent return. FX impact is shown separately to allow decomposition of stock performance vs currency effects.
Limitations & Caveats
- Monthly returns for some stocks are estimated based on YTD and available data points, as comprehensive intraday-resolved monthly constituent-level screener data was not available for all indices
- The conflict is ongoing as of the report date (March 28, 2026) — all data is subject to rapid change
- Institutional buyer data (13F filings) reflects holdings as of December 31, 2025, and may not capture post-war positioning changes
- Analyst consensus targets were set at various dates and may not reflect the most current war dynamics
- CSI 300 constituent-level data was limited; Chinese stock selection based on available daily gainer data and sectoral analysis
- Some FX rates are approximated based on available data points and may differ slightly from precise closing rates
Key Source URLs
| Topic | Source |
|---|---|
| War Timeline | Wikipedia - 2026 Iran War |
| Economic Impact | Wikipedia - Economic Impact |
| Hormuz Crisis | Wikipedia - Hormuz Crisis |
| Oil Prices | CNN - Oil Past $100 |
| Gold | J.P. Morgan Gold Forecast |
| S&P 500 Performance | Middle East Insider |
| Defense Stocks | Primary Ignition |
| Tanker Stocks | 24/7 Wall St |
| Korean Defense | CNBC |
| European Defense | CNBC |
| India Defense | BusinessToday |
| Japan Defense | Bloomberg |
| Recession Risk | Bloomberg |
| FX Data | Federal Reserve H.10 |
Anka Research | AI-Augmented Market Intelligence
Author: Bharat Ankaraju | Report: Weekly Research Brief #001
Methodology: This report was produced using AI-assisted research and analysis tools, with human editorial oversight and source verification. All data is sourced from publicly available information and is believed to be reliable but not guaranteed for accuracy or completeness.
Disclaimer: This report is for informational and research purposes only. It does not constitute investment advice, a recommendation, or a solicitation to buy or sell any securities. Past performance is not indicative of future results. The conflict is ongoing and market conditions may change rapidly. Always conduct your own due diligence before making investment decisions.
Report compiled: March 28, 2026 | Data sources: As cited throughout | Currency base: USD equivalent where noted
Contact: Anka Research | © 2026 All rights reserved