Amid ongoing tensions in the Middle East, particularly following the outbreak of conflict involving the U.S. and Israel with Iran on February 28, oil prices have taken center stage in market discussions. Despite this volatile backdrop, Tom Lee, a strategist at Fundstrat, remains optimistic about the stock market’s performance this month, suggesting it may experience positive momentum.
Lee emphasized that even though the current conflict is not perceived as a short-term issue, historical trends indicate that stock markets often rebound once warfare begins. The phrase “sell the build-up, buy the war” reflects a pattern observed during previous conflicts, which Lee notes has been true in the last eight significant wars.
As the conflict escalates, oil prices have surged, a situation that could impact investors. However, Lee argues that the U.S. stands to benefit from higher oil prices. Brent crude and West Texas Intermediate (WTI) crude prices increased even as the Group of Seven countries coordinated to release 400 million barrels from their strategic petroleum reserves. Since the U.S. became a net oil exporter in 2020, it experiences a direct economic boost from rising crude prices, contrasting with other regions that are more adversely affected. Countries in Asia, particularly China, and Europe are likely to face significant economic challenges due to the disruptions caused at the Strait of Hormuz.
Lee also pointed out the implications of higher energy costs on global economic growth, suggesting that as growth slows, investor sentiment may shift toward growth stocks. He characterized the S&P 500 as primarily a growth index, hinting at a favorable outlook despite current uncertainties.
Looking ahead, Lee anticipates a more challenging market environment in 2026, predicting a period of stock rally followed by a decline, with a robust finish to the year. This long-term perspective underscores the complexity of navigating financial trends amid geopolitical uncertainties.
