The Week Ahead
War in the middle east & its impact on the U.S./ inflation, SPY greeks + A stock to watch
Good Morning Stock Enthusiasts,
After President Trump set a deadline for Israel & Iran’s nuclear discussions, Israel took Iran by surprise, wasting no time to strike. Israel successfully struck key military and nuclear facility locations.
After the planned talks surrounding Iran’s nuclear program were cancelled, Israel and Iran have continued bombing each other as we enter day 4 of the conflict. The war now looks like it will continue beyond the one-week mark, as no progress has been made towards any potential ceasefire.
Reasons to Worry
Potential U.S. Involvement
Due to the U.S. role in facilitating the nuclear talks, setting the deadline, and the U.S. support of Israel’s air defence the United States now finds itself indirectly involved in this conflict.
Even though the U.S. had no direct involvement at this point, they were aware of the plans to strike Iran’s nuclear facilities and fully backed Israel in its decision to do so.
Should the U.S. get involved, it would likely draw in additional countries, creating a larger, more widespread conflict.
Inflation
One of the major costs of conflict in the Middle East is the rise of oil prices. History shows us that war within the region can drastically impact global inflation.
1973-1974 Arab Oil Embargo
U.S. supports Israel in the Yom Kippur war, OPEC cut exports and the price of crude oil quadrupled
U.S. CPI went from 3.4% in 1972, to 8.7% in 1973 and 12.3% in 1974
1979 Iranian Revolution and Iraq-Iran War
Crude oil rises from $16/barrel to $40/barrel
U.S. CPI tops at 13.3% in 1979
U.S. enters a period of stagflation, Fed Chair Volcker sharply raises rates
1990-91 Gulf War
Brief spike in oil that led to U.S. CPI spiking to 6.1% in 1990
2000 & Beyond
2003 Iraq invasion only created a modest spike in oil, and inflation remained muted at 1.9%
2011 Arab Spring - protests, uprisings, and armed rebellions caused a mild spike in oil prices and inflation. U.S. CPI tops around 3%.
The United States became a net exporter of both crude oil and refined petroleum products as of October 2019. This was the first time this had occurred since 1949. This move to be able to produce more than we consume has led to the U.S. becoming the largest exporter of crude oil. The positive impacts go far beyond the U.S.’ trade as the post-2000 Middle East conflicts have had far less of an effect on U.S. inflation rates.
Reasons to be Optimistic
Nuclear warfare is not only bad for all involved but also for all of mankind. Should any country ever attempt to test a nuke it is likely that many surrounding countries would act swiftly with military force, attempting to prevent it.
Now, should a country plan to test nukes but have 10-12 ready to go, this is a major problem. Acquiring the intel needed to stop 1-2 is incredibly different than stopping 10+.
To better understand why Israel chose to strike Iran’s nuclear program, it is important to know what Iran was doing. Iran has two types of nuclear programs, civilian and military.
Civilian Nuclear Programs - focus on the use of uranium to produce energy/electricity - require Uranium to be enriched between 3-5%
Military Nuclear Programs - focus on the use of uranium to build nuclear warheads, requiring Uranium to be enriched to 90%
According to the IAEA (International Atomic Energy Agency), Iran had stockpiled more than 881 pounds (400 kg) of uranium enriched to 60%. Once the uranium reached 90% enrichment, it would have then been considered military grade and be enough to build 10 nuclear warheads. Add this to the rise in Iran’s missile testing, and it paints a dreary picture.
Economic Calendar
Monday, June 16
Empire State manufacturing survey
Tuesday, June 17
U.S. retail sales
Retail sales minus autos
Import price index
Import price index minus fuel
Industrial Production
Capacity Utilization
Business Inventories
Homebuilder confidence index
Wednesday, June 18
Housing starts
Building permits
initial jobless claims
FOMC Interest Rate Decision
Fed Chair Powell Press Conference
Thursday, June 19
None scheduled, Juneteenth holiday (Market closed)
Friday, June 20
Philadelphia Fed manufacturing survey
U.S. leading economic indicators
SPY 0.00%↑ Greeks
After initially trading lower on the news of Israel and Iran going to war, the SPY has since stabilized during futures trading and recovered back above the 600 level.
To be expected when opening at a level that holds major physiological importance, today’s SPY pivot sits at 600.
With over 4B in positive delta exposure and over 400m in positive gamma exposure, traders can see exactly why the 600 strike is the key pivot in deciphering the SPY’s price action.
SPY pivot
600
Long only if above
Targets 602-603
Sustained trade >603 is set to benefit the positioning at the SPY’s 605 strike
Short below 600
Should the SPY fail to hold 600 and sellers will have the opportunity to take control of the session
Target 595
Any loss of 595 can continue weakness lower
Target 590
UUUU 0.00%↑
UUUU, Energy Fuels Inc. has undergone years of muted trade as it consolidated within a $4 range between $4-8 over the last 4 years. The weekly chart below gives a good visualization of it.
During Friday’s session, participants were spotted positioning in unusual OTM UUUU calls that look to target the upper end of the range seen over the last 3 years of trade.
The unusual call of choice; UUUU’s 1/2026 8c.
Due to the new tensions in the Middle East, UUUU is already seeing the stock price benefit in the short term as it gaps higher to around $5.95 before entering today’s trade.
To decipher today’s price action, traders can utilize the pivot located at $6 (right around where UUUU is expected to open) in order to analyze the ensuing trade.
UUUU pivot
$6
Long only on sustained trade above
Any failure to hold $6 can result in more chop below
Side note: Traders are positioning in the above calls with time, & I believe oil still has more upside, especially should tensions in the middle-east remain high.
Should UUUU continue to trade <6 and I will look for continued positioning across various longer-dated expiries to determine if this trade simply needs more time to develop. However, sustained trade >6 is bullish and has the potential to continue higher in the near-term should it continue to find support above.
That’s all for this edition of my newsletter. I hope you enjoyed it!
Safe Trading,
Nick Stocks