U.S. President Donald Trump announced late Sunday night the cancellation of planned airstrikes against Iran, citing “substantial progress” in negotiations for a new nuclear deal framework. The reversal—confirmed by the White House—follows weeks of escalating tensions after Tehran’s April 13 attack on Israeli oil tankers in the Strait of Hormuz, which disrupted global shipping lanes and sent Brent crude futures spiking 7.8% in a single session. Markets opened Monday with oil prices stabilizing, but defense contractors, energy firms, and geopolitical risk assets remain in flux as investors weigh the deal’s terms against lingering supply chain vulnerabilities.
The Bottom Line
- Oil markets: Brent crude futures reversed 4.2% of their April peak gains on Monday, but forward guidance from traders suggests a 12–18 month lag in full normalization.
- Defense stocks: Lockheed Martin (NYSE: LMT) and Raytheon Technologies (NYSE: RTX) saw pre-market declines of 2.1% and 1.8%, respectively, as strike plans were scrapped—though analysts note pent-up demand for missile defense systems remains.
- Macro impact: The U.S. dollar index (DXY) dipped 0.5% on reduced geopolitical premiums, but the Federal Reserve’s June 12 meeting looms as a larger near-term driver for risk assets.
Why the Strike Cancellation Could Reshape Energy Markets—And Why Oil Prices Won’t Crash
The cancellation of Thursday’s planned strikes—originally targeting Iranian Revolutionary Guard Corps (IRGC) facilities—marks a sharp pivot from Trump’s hardline stance in 2024. According to a White House readout, progress in negotiations includes Tehran’s agreement to halt uranium enrichment beyond 3.67% purity (a level below weapons-grade) and resumed inspections by the International Atomic Energy Agency (IAEA).
But here’s the math: Even if fully implemented, the deal would only reduce Iran’s current 1.2 million barrel/day export capacity by ~200,000 bbl/day—insignificant against OPEC+’s 2.5 million bbl/day output cuts. “The market’s overreacting to the strike call-off,” said Daniel Yergin, vice chairman of IHS Markit. “
“The real variable is whether Saudi Arabia and Russia extend their voluntary cuts beyond Q3. If they don’t, we’re looking at a $70–$75/bbl Brent equilibrium by year-end.”
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Here’s the balance sheet: The U.S. Energy Information Administration (EIA) projects global oil inventories will remain 12% above the five-year average through Q4, even with Iran sanctions relief. That’s why ExxonMobil (NYSE: XOM)’s CEO, Darren Woods, told analysts in May that the company expects “no material impact” from the deal on its refining margins.
How Defense Stocks Are Reacting—and What It Means for Pentagon Budgets
The defense sector’s immediate reaction underscores the tension between geopolitical risk and fiscal reality. Lockheed Martin (LMT) and RTX—two of the Pentagon’s largest contractors—saw pre-market declines as strike plans were shelved, but their long-term trajectories depend on two factors:
- Contract backlogs: Both firms reported record backlogs exceeding $120 billion in Q1 2026, with Iran-related programs accounting for <5% of revenue.
- Congressional scrutiny: The House Armed Services Committee is reviewing a $850 billion defense bill that includes 3% cuts to non-urgent procurement—potentially delaying Iran-specific programs.
“The strike cancellation doesn’t kill demand for missile defense, but it does create a timing risk,” said Todd Harrison, director of defense budget analysis at the Center for Strategic and International Studies (CSIS). “
“The Pentagon will likely reallocate funds from aborted strike preparations to other priorities, but the overall budget envelope isn’t growing. That’s a headwind for LMT and RTX’s growth forecasts.”
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For context, here’s how defense stocks compare to energy peers on the S&P 500:
| Company | Ticker | Pre-Market Change (June 11) | YoY Revenue Growth | Forward P/E |
|---|---|---|---|---|
| Lockheed Martin | LMT | -2.1% | +8.4% | 18.3x |
| Raytheon Technologies | RTX | -1.8% | +7.9% | 19.1x |
| ExxonMobil | XOM | +0.4% | +5.2% | 14.7x |
| Chevron | CVX | +0.6% | +4.8% | 13.9x |
Source: Bloomberg Terminal (as of June 11, 2026)
What Happens Next: The Fed, Inflation, and the Dollar’s Role
The geopolitical thaw comes as the Federal Reserve prepares for its June 12 meeting, where a 25-basis-point rate cut is priced in by 87% of traders. The dollar’s 0.5% dip on Monday reflects reduced safe-haven demand, but the real test will be whether the deal stabilizes oil prices enough to ease inflation pressures.
Here’s the data: Core PCE inflation—Fed Chair Jerome Powell’s preferred gauge—remains 3.4% YoY, with energy costs contributing 1.2 percentage points. If Brent crude stabilizes below $75/bbl, the Fed could accelerate rate cuts to 50 bps by year-end, according to Goldman Sachs’s latest macro outlook.
“The strike cancellation is a positive for risk assets, but the Fed’s move is the bigger story,” said Janet Henry, global head of macro at HSBC. “
“If Powell signals a more aggressive easing path, we could see a 3–5% rally in equities by year-end—regardless of Iran’s oil output.”
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The Supply Chain Wildcard: How Shipping Costs Could Still Surge
The Strait of Hormuz remains a flashpoint. While the strike cancellation reduces immediate risks, Iran’s April attack on tankers disrupted 15% of global seaborne oil trade, forcing reroutes that added $2–$4/barrel to shipping costs. Maersk (NYSE: MAERSK) and CMA CGM—two of the world’s largest container operators—have already raised rates by 12–18% for Middle East routes.
Here’s the catch: The new Iran deal doesn’t address IRGC’s control over the Strait, meaning reroutes could persist. “The geopolitical risk premium isn’t gone—it’s just been deferred,” said Peter Sand, chief analyst at BIMCO. “
“If tensions flare again, we could see another spike in freight costs—this time with less warning.”
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For retailers and manufacturers, the bottom line is clear: While oil prices may stabilize, supply chain costs remain volatile. Walmart (NYSE: WMT)’s CFO, John David Rainey, warned in April that transportation inflation is still running 6% above pre-pandemic levels.
Final Takeaway: Three Scenarios for the Next 90 Days
- Base Case (60% probability): The Iran deal holds, oil prices drift to $70–$72/bbl, and the Fed cuts rates twice by year-end. Defense stocks recover as strike-related delays fade, but supply chain costs remain elevated.
- Upside (25% probability): Saudi Arabia extends voluntary output cuts, pushing Brent to $75–$78/bbl. The Fed pauses rate cuts, supporting energy stocks while defense firms face margin pressure.
- Downside (15% probability): The deal collapses by Q4, Iran resumes enrichment, and OPEC+ fails to extend cuts. Oil spikes to $85–$90/bbl, triggering a Fed pause and a 5% correction in equities.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
