Taking Cover (Covered Calls, That Is) Amid the War Uncertainty

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The conflict in the Middle East is fast approaching the one-month mark. Despite pronouncements, Truth Social posts, and various commentary and sound bites; it doesn’t feel this nascent regional war is anywhere close to being resolved. The Strait of Hormuz remains effectively closed. This is having a large impact on oil, liquefied natural gas, and other energy prices. Gasoline prices are up just over a buck a gallon since the start of the war in the U.S. Europe could soon face some fuel shortages and Asia is particularly vulnerable given they take 60% of oil exports from the gulf region. Diesel prices are up roughly 50% since the end of 2025. This is increasing transportation costs for every good that needs to move to its final destination.

Fertilizer prices have also spiked as a good chunk of the global supplies of urea, nitrogen and phosphate move through this choke point. This will push up food inflation levels with a lag. Helium (necessary for semiconductor manufacturing) and aluminum exports are also being crimped. Probabilities for further fed funds cuts in 2026 have been reduced greatly since this war broke out. If this critical waterway is not reopened soon, triggering a wave of new inflation, the next move by the central bank might be a rate hike. Something that is no way priced into the current market.

While some asset classes such as bitcoin, gold, and silver, are in bear market territory, the major market indexes have held up exceedingly well given the circumstances. The S&P 500 is down just over 5% for 2026 after Thursday’s close. I find investor complacency quite misplaced even as the VIX has moved through the $25 level to the upside. That said, I have a lot of "dry powder" within my portfolio. I am employing that very incrementally in dips in the market.

This week I opened new initial positions in two beaten down names via covered-call orders. Both stocks are trading at valuations not seen in some time and also have seen recent insider purchases. Always a nice vote of confidence in turbulent times. First, I finally pulled the trigger on KKR & Co. (KKR) on Wednesday. This is a position for Doug Kass as well it should be noted.

The stock has been hit hard by growing worries around the private credit space. This has triggered a better than 35% decline in the shares since their recent highs last December. This asset manager has exposure to this increasingly toxic space, but it is just one part of its portfolio. Assets under management grew 17% year-over-year in the fourth quarter and KKR has less exposure to the software sector than most of its peers. In addition, insiders have purchased more than $45 million in new stock since February on the dip.

I also just took an initial position in Salesforce (CRM) . Its stock has lost 30% of its value this year due to growing fears AI will disrupt its business model. These worries feel misplaced due to Salesforce’s moat and deep integration into client’s systems. It is also integrating AI capabilities into its offerings. The stock trades at some of its lowest valuations in many years and has a market cap of just over $170 billion. The company generated $14.4 billion free cash flow last year and plans to grow that 10% in fiscal 2026. In addition, Salesforce just embarked on a massive stock buyback program that will retire nearly 30% of its float at current prices. Two company directors also purchased shares last week.

At the time of publication, Jensen was long CRM and KKR.