March 2nd Pre-Market

Good morning.

Headlines are loud for the rest of the week, but three things will stand out:

Crude near $80, shipping disruptions, and defense demand being pulled forward.

The next 48 hours will tell us if this fades or feeds into inflation and earnings cuts.

Let’s dig in…

Today's Big Picture

1. Oil Strength Changes The Macro Math 

Crude is pressing against $80 as Middle East supply risk rises and key routes remain unstable. At this level, it's manageable. Above $85, it's an earnings problem. Airlines, transports, and consumer margins get revised first. Energy becomes the funding trade. If flows through the Strait normalized, the premium fades. If not, this sticks.

2. Shipping Disruption Is The Quiet Risk

Major carriers are rerouting vessels around Africa to avoid conflict zones. That adds time and cost immediately. Freight inflation doesn't hit day one. It hits in 2 to 4 weeks through goods pricing. If spot rates move this week, retail and industrial estimates come under pressure next. Watch the rate indexes, not the headlines.

3. Defense Revenue Is Being Pulled Forward

Escalation shifts focus from diplomacy to replenishment. Investors are pricing faster procurement and stronger backlog visibility. If Washington signals sustained engagement, multiples hold. If rhetoric cools, the bid fades quickly.

Market Overview

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Stock Spotlight (pre-market)

Lockheed Martin $LMT ( ▲ 2.56% )  
is leading the defense trade, up in the premarket. Northrop Grumman $NOC and RTX $RTX are right behind it. War is good for this group and the tape is pricing in a prolonged conflict.

AeroVironment $AVAV ( ▼ 2.84% )  
is the biggest mover in premarket, up more than 10. Drone warfare is front and center in this conflict and the market is treating this name like a direct beneficiary.

Exxon Mobil $XOM ( ▲ 2.67% )  
is up in early trading on the crude move. Chevron $CVX and ConocoPhillips $COP are also higher. If Hormuz stays disrupted, this group has a lot more room to run.

United Airlines $UAL ( ▼ 8.7% )  
is down in premarket, worst among U.S. carriers. It has the most international exposure. American $AAL and Delta $DAL are both down. Emirates and Etihad suspended all flights. This is a global travel disruption.

Coherent $COHR ( ▲ 3.51% )  
and Lumentum $LITE are in focus after Nvidia $NVDA announced plans to invest $2 billion in each company through multi-year deals. This is Nvidia betting big on photonics for the next wave of AI infrastructure.

Berkshire Hathaway $BRK.B ( ▲ 0.45% )  
reported a 30 slide in quarterly operating earnings. Shares are slightly down about. Not the worst timing for Buffett to be sitting on his famous cash pile, though.

What to Watch

Strait of Hormuz Tanker Traffic 
The single most important variable for oil prices today. About 15 million barrels a day flow through this chokepoint. It's not formally closed but nothing is moving. If that doesn't change soon, $80 oil is just the beginning.

Rubio Briefs Congressional Leaders (4:00 PM ET) 
Secretary of State Marco Rubio updates Senate and House leadership on Iran. Congress is also moving toward a war powers vote this week. Any signal on escalation or offramp will move the tape into the close.

Iran's Leadership Transition A temporary council is running Iran right now. The Assembly of Experts will pick a new supreme leader. Whether the new leadership escalates or seeks negotiations determines how long this conflict lasts and how long oil stays elevated.

Thanks for reading 🙂

- John

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