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U.S. politicians stock up on war stocks as Middle East tensions ramp up

U.S. politicians stock up on war stocks as Middle East tensions ramp up

U.S. politicians are no strangers to buying situation-appropriate stocks as is well – and darkly – exemplified by their investments in war stocks near the time of the October 7 attacks.

Unfortunately, April 2024 has brought an uptick in similar activity as at least one Representative – it is tough to gauge if the trend is more widespread as the laws managing the reporting deadline are both lenient and not strictly followed – has been loading up on defense stocks.

On April 12, Kevin Hern disclosed a string of significant purchases among which the $1,000-15,000 – again, the regulations are such that the ranges can be frustratingly large – investments in Raytheon (NYSE: RTX) and Lockheed Martin (NYSE: LMT) stand out.

Acquisitions of such war stocks have recently proven highly lucrative as exemplified by the 41% growth of an LMT investment made by Senator Markwayne Mullin on October 13 as the war that already saw targets in Israel, Palestine, Lebanon, Iraq, Syria, and Yemen hit with no end in sights despite the feverish efforts in the UN and damning reports coming out of international organizations.

Not just defense stocks

Hern’s April 12 disclosure is also interesting for picks other than pure military stocks. Among the 15 trades reported that day, quite a few are purchases of various energy stocks including both traditional oil and gas corporations such as Exxon Mobil (NYSE: XOM), and hydrocarbon firms like Pioneer Natural Resources (NYSE: PXD) and Devon Energy (NYSE: DVN).

The energy stocks may be even more worrying than the war stocks given the recent Iranian retaliatory attack launched against Israel – and the aggressive posturing indicating that things are only likely to get worse – as a broader confrontation between the two could disrupt passage through the Hormuz Strait – one of the most important oil shipping lanes in the world.

Location of the island of Hormuz and the Strait of Hormuz. Source: Google Maps

Dread mounts as Congress trades war, energy, and (in)security

While it is generally difficult to discern behind-the-scene information, especially if the primary indicator comes in the form of Congressional trades, recent months have brought much reason to worry.

In the context of broad geopolitical instability that has seen the price of gold skyrocket as the global north fears the Russia-China alliance and the global south the increasingly aggressive posture of certain Western countries and allies, the many military stock investments such as Representative Hern’s and cybersecurity options trades such as the one made by Nancy Pelosi appear like harbingers of disaster.

Additionally, large government contracts, such as the missile defense one recently awarded to Lockheed-Martin, further contribute to the increasing sense of dread – so much so that even likely inconspicuous sales feel threatening.

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