What should we start buying in the US stock market next week?

The US and Iran are at war. What should we buy when the market opens next week? Almost everyone is saying: buy oil, buy gold, buy defense stocks.

But no one is telling you this: hedge funds' net long positions in crude oil have hit a 22-month high; gold has risen for seven consecutive months, reaching a historical peak of $5,278; the defense sector has already gained between 17% and 34% year-to-date. The smart money had already positioned themselves before Friday. The price you can buy at on Monday's open is the price they are willing to sell to you.

In 2020, when the US killed Soleimani, oil prices jumped 4% on the first day, only to give back all gains within a week. In June 2025, when Israel struck Iran's nuclear facilities, oil prices surged over 12%, returning to pre-strike levels two weeks later.

This is exactly what Soros's theory of reflexivity describes: when everyone who wants to go long has already gone long, the marginal buyers disappear, leaving only sellers. The consensus itself creates the conditions for its own reversal.

Buying oil stocks when oil prices rise is typical first-order thinking, something anyone can do.

What's worth spending time on is the second-order reasoning.

The transmission chain of rising oil prices is far more complex than it appears. Higher oil prices push up global inflation expectations, giving the Fed even less reason to cut rates. With US interest rates staying high, the interest rate differential between China and the US widens, causing global capital to flow back to the US dollar in pursuit of yield. Simultaneously, war itself is a risk-off event, driving money towards the dollar and putting pressure on emerging market currencies collectively.

For China, there's an even more direct layer: 70% of its oil relies on imports. Soaring oil prices directly increase import costs, narrowing the trade surplus and increasing selling pressure on the Renminbi in the foreign exchange market. The A-share market is bound to face pressure in this environment. However, state-owned energy stocks might instead become a safe haven for capital. The reason has nothing to do with the first-order logic of "buy oil stocks because oil is up." Under the pressure of RMB depreciation and foreign capital outflows, large-cap state-owned enterprises are one of the few defensive choices for institutions.

Now, look at the Strait of Hormuz. All analyses emphasize that 20% of global oil shipments pass through there, hinting that Iran might blockade it. Historically, Iran has indeed never blockaded it—not during the eight years of the Iran-Iraq War, nor during decades of sanctions—because its own oil exports also use that route. But this time is different: the US-Israeli strikes explicitly target Iran's leadership and nuclear facilities, aiming at the regime itself. A regime that still wants to survive won't block its own lifeline, but a regime on the verge of collapse has no such concerns. The Strait of Hormuz becomes their final card. So, there are two completely different scenarios here: the regime holds, engages in limited retaliation followed by negotiations, and the fear premium quickly dissipates; or the regime is truly about to fall, leading to a scorched-earth response, and the ceiling for oil prices could be much higher than anyone anticipates.

There's another layer rarely mentioned: this is a midterm election year. Donald Trump needs a "quick victory" to demonstrate American strength, then declare mission accomplished. He doesn't need a protracted war; voters don't want a second Iraq, nor do they want oil prices to spiral out of control, as inflation would hurt his approval ratings. If this political calculus holds, the conflict is highly likely to de-escalate within weeks. How long the conflict lasts is the key variable determining whether to trade the trend or mean reversion, far more important than "what to buy."

So, how to think about positioning? It depends on which scenario you're betting on. If you believe this is a limited strike, the Iranian regime will hold, and things will cool down in a few weeks, then following the consensus and going long on Monday is fine. But be clear-eyed: you're in a crowded trade, and you should consider exiting when energy and defense stocks are up 5% to 8%. If you believe this is a genuine attempt at regime change and Iran might resort to a scorched-earth policy, then the upside for oil and gold is far from exhausted, and you should hold or even add to your positions. The trading directions for the two scenarios are completely opposite. The key signal is the survival status and retaliation intensity of the Iranian regime in the next 48 to 72 hours. Watching this is more useful than watching any price chart. (Personal opinion, not constituting any investment advice.)