On Saturday, February 28, the United States and Israel launched Operation Epic Fury, the largest American military operation in the Middle East since the Iraq War in 2003. Iran fired back. The Strait of Hormuz came to a near standstill. And everyone braced for a market crash on Monday morning.

It never came.

The market has seemed to price in a little bit of this already. Maybe it would have performed differently if the conflict escalated during market hours.

That observation matters more than it sounds. Prediction markets had been flagging an Iran strike for weeks. The market was not blindsided.

The question now is what comes next. Here is what the data is saying across every major theme.

The S&P 500 held structure on Monday. It opened below the 100-day moving average, touched resistance at the 21-day and 50-day, and closed right below those levels. That is is a market under pressure that is still holding its technical floor.

The weekly chart is equally reassuring. The 21-week moving average has acted as strong support, and QQQ is holding that same level, for now. Lose the 21-week, and the next meaningful support levels are meaningfully lower. That is the technical line in the sand worth watching.

Defense and aerospace stocks — Monday, March 2

Every major defense and aerospace theme on the heat map was green on Monday: drones, missiles, space tech, aerospace. One name that bucked the trend was AeroVironment ($AVAV)

AVAV's candle on Monday was brutal. The stock initially surged 20% on drone demand expectations, then crashed after Raymond James downgraded it based on concerns that its backlog could shrink as the US Space Force recompletes a large program. A 40-point intraday swing unrelated to Iran. It is a reminder that individual company risk does not disappear just because a sector is rallying.

The most durable names in this move are Northrop Grumman, Raytheon, and Lockheed Martin. Northrop closed up nearly 6%. Raytheon up close to 5%. Lockheed up 3.5% and already up 32% year-to-date. These companies are not just benefiting from headlines. The proposed $1.5 trillion FY2027 defense budget represents a structural spending shift that sustains these moves well beyond any single conflict.

Palantir deserves specific attention. Its Maven Smart System uses AI to process drone feeds, satellite imagery, and intelligence reports in real time, providing targeting decisions at a speed no human analyst can match. Government revenue grew 66% year-over-year last quarter. The stock jumped nearly 6% on Monday and has a contract backlog that spans years, not weeks.

Brent crude closed Friday at $72.87 a barrel. By Monday it touched $82 intraday. By Tuesday morning it’s trading around $83, its highest level since January 2025.

Every prior Middle East flare-up over the past decade followed the same pattern: oil spiked on risk premium, then faded within days once it became clear there was no actual supply disruption. The Soleimani killing in 2020 reversed fully within a week. The Israeli strikes on Iran last summer did the same.

This time is structurally different. The Strait of Hormuz, through which roughly 20% of the world's entire oil supply flows every day is effectively shut.

Tanker stocks are one of the highest-conviction asymmetric trade in the Iran Conflict basket. VLCC supertanker rates, the benchmark for moving Middle Eastern crude to Asia, hit an all-time record of $424,000 per day on Monday. That is nearly triple where rates started the year.

Frontline ($FRO) is up 84% year-to-date and moved further on Monday. Scorpio Tankers up 55% year-to-date. DHT Holdings hit a new 52-week high. The logic is simple: when the Strait is dangerous, oil that does move has to reroute around Africa. Fewer trips per ship means tighter tanker capacity. Rates go up. These companies earn record profits.

The honest answer is that it depends entirely on one variable: how long the Strait of Hormuz stays functionally closed.

Steve Eisman told CNBC on Monday he would not change a single trade. His view: if this ends in two months, prices go right back to where they were. Barclays had a different take,they advised clients to wait for a 10% S&P correction before buying, arguing the risk-reward is not yet compelling.

Watch tanker traffic through the Strait of Hormuz. That single data point tells you more about where this is heading than any news headline.

If traffic resumes within two to three weeks, this follows the historical playbook. Oil fades, defense stocks hold some gains but do not sprint, and the market refocuses on earnings and AI. If the Strait stays closed for a month or more, the inflation implications change the Fed's calculus, $100 oil becomes a real headwind for the broad market, and the gap between winners and losers in this rotation gets much wider.

Structure is intact for now. The 21-week moving average is holding across major indices. Lose that support and the next support is meaningfully lower.

-Pierce, InvestorWaves.com

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Note: This article does not provide investment advice. Any stocks mentioned should not be taken as recommendations. Your investments are solely your decisions.