Markets Showing Classic Risk-on and Risk-off Dynamics 

The market is showing classic risk-on and risk-off dynamics right now amid heightened geopolitical tensions, particularly in the Middle East involving U.S.-Iran standoffs over nuclear issues and potential disruptions in the Strait of Hormuz.

Oil — Crude has pushed higher recently, with Brent settling around $71-72/barrel; recent closes near $71.76–$71.97, having surged on Iran conflict concerns and tighter physical markets. WTI is trading in the mid-$66 range around $66.39–$66.48.

This puts Brent just above $72, marking a notable rally from earlier lows and the highest levels since last summer in some reports. The move reflects a growing geopolitical risk premium, bolstered by falling U.S. inventories and fears of supply disruptions, even as longer-term forecasts point to potential oversupply pressures later in the year.

Gold is firmly bid and in a strong uptrend, recently surging above the $5,000/oz milestone with spot prices hitting around $5,040–$5,062 recently, with futures in the $5,039–$5,072 range. This reflects classic safe-haven demand driven by the same Middle East uncertainties, central bank buying which continues to accelerate, and gold’s decoupling from dollar strength in this environment.

Sovereign and institutional accumulation is now dominating, even with subdued retail demand in key markets like India and China.
Defense stocks are holding firm and often leading gains in this climate.

Aerospace & defense names like Lockheed Martin, Northrop Grumman, RTX, Boeing have seen solid year-to-date performance, with some up 20%+ in early 2026 amid elevated military spending expectations, U.S. budget increases, and European rearmament.

The sector benefits from long-term government contracts and acts as a relative defensive play during uncertainty. Recent catalysts include mobilization signals and potential escalations boosting sentiment.

The impact of the current geopolitical tensions primarily U.S.-Iran standoffs, with risks around the Strait of Hormuz on natural gas prices is more nuanced and regionally differentiated than the clear upside seen in oil, gold, and defense stocks.

U.S. Natural Gas (Henry Hub Benchmark)

Prices remain relatively subdued and are not showing a significant geopolitical premium at present. Henry Hub futures settled around $3.05–$3.07/MMBtu as of February 20, 2026, with spot prices in a similar range recent weekly averages dipping to ~$3.27 earlier in February after higher spikes from prior cold weather.

This reflects a sharp decline over the past month down ~37% in some measures, driven by: Record-high U.S. production ~108–109 bcf/day. Milder weather reducing heating demand. Storage draws below expectations, keeping inventories only modestly below normal.

The U.S. is a net exporter but largely self-sufficient, with domestic supply overwhelming any indirect effects from Middle East disruptions. Escalation could indirectly support prices via higher LNG demand if global trade tightens, but right now, bearish fundamentals dominate. Analysts note U.S. prices are near 4-month lows despite the tensions, highlighting a disconnect from crude’s rally.

European Natural Gas (TTF Benchmark)

This is where the geopolitical risk premium is more evident and supportive. TTF prices (Dutch hub, key European benchmark) are around €31.50–€32/MWh recently (March 2026 contract ~€31.88), with notable rallies on specific days (e.g., +6.5% in one session amid escalation fears).

Fears of disruptions to global LNG trade through the Strait of Hormuz, which handles ~20% of world LNG flows; heavily from Qatar, a top supplier to Europe. EU gas storage is well below average ~32% full vs. 49% 5-year norm, leaving less buffer against supply shocks.

Any prolonged Middle East conflict could tighten LNG availability, pushing Europe; increasingly reliant on seaborne imports post-Russia pipeline cuts toward higher spot prices. While not at crisis levels, the upward moves reflect safe-haven buying in gas futures, similar to oil’s risk premium but amplified by Europe’s vulnerability.

If tensions stay contained, natural gas upside remains capped — especially in the U.S., where weather and production are key. Europe sees more bid support. A blockade or major supply hit could spike global LNG prices sharply potentially flowing back to U.S. export terminals and lifting Henry Hub indirectly via higher export demand.

Analysts highlight this as a tail risk, with European prices more sensitive. Unlike oil which is directly tied to Persian Gulf crude flows, natural gas feels the impact more through LNG channel risks — boosting Europe and Asia more than the U.S. This explains why defense stocks and gold are firm, oil surges, but U.S. natgas lags.

The current climate adds a modest floor/underpin to natural gas (stronger in Europe), but it’s not driving a broad surge like in crude. Fundamentals (U.S. oversupply, mild weather) are counteracting much of the geopolitics for now. If headlines worsen, watch European TTF for the quickest reaction — and potential knock-on to U.S. LNG exports.

This setup screams geopolitical premium across energy, precious metals, and defense — exactly what we’d expect if tensions stay elevated or worsen. Markets are pricing in risk without full-blown disruption yet, but any further headlines could amplify moves. Keep an eye on developments in the Persian Gulf; that’s the main driver here.