Nicole Lapin

When a conflict breaks out in the Middle East, traders immediately start pricing in risk that supply could be disrupted.

It doesn't matter if a single barrel has actually been taken off the market yet.

The fear of disruption is enough to send prices higher because markets trade on expectations.

Iran produces nearly 1.6 million barrels of oil per day.

Add that to the threat of the Strait of Hormuz being blocked, and suddenly the market is staring at a potential supply shock with no easy replacement.

Less supply, same demand, higher price.

That's the equation that's playing out right now.

The spike in crude has a direct and unpleasant downstream effect for gas prices.

When refineries pay more for oil, you pay more at the pump, usually within days to weeks.

And this is on top of an already fragile economic environment.

Friday's wholesale inflation data came in at 2.9%, nearly double what economists were expecting.

So we've got war-driven energy inflation stacking on top of pre-existing inflationary pressure, and that is not a great combination.

While this is a big escalation in the Middle East, there has been a long history of conflict.

And when you look at that history, you can see patterns in the way that these investments move up,

and down in response.

Understanding these patterns and being able to react quickly is an important way to protect your portfolio.

Here's what goes up.

Defense stocks are the most obvious.

And yes, they've moved dramatically recently.

At the time I'm recording this, Lockheed Martin is up about 3% compared to last week.