The Iran War, My Portfolio, and Why I’m Considering Honeywell
Five weeks in, the Iran war is still the only macro story that matters to my portfolio.
On February 28, the US and Israel struck Iran, Khamenei was killed, and the Strait of Hormuz effectively closed. Roughly 20% of the world’s daily oil and gas passes through that narrow waterway — and it’s been largely shut ever since.
The numbers since then have been hard to ignore:
- OECD cut global GDP growth to 2.9% for 2026, down from 3.3%
- US inflation now forecast at 4.2%, up 1.2 percentage points
- Goldman Sachs raised US recession probability to 30%
- Brent crude futures peaked at $126; physical spot cargo hit $141 on April 2 — highest since 2008 — reflecting acute real-world supply tightness
- S&P 500 down roughly 7% from its January all-time high
The world has scrambled for workarounds — Saudi Arabia’s East-West pipeline running at full capacity, the IEA releasing 400 million barrels from strategic reserves. Stop-gap measures. They cover 26 days of lost supply. Not solutions.
The macro damage is already showing up. As of writing, Iran and Oman are working on a protocol to ensure safe passage through Hormuz after the war — the first concrete signal from Iran’s side that the Strait will reopen. Markets rallied on the news. Whether it holds is another question.
But a short war doesn’t mean a short economic impact. After 1973, after 1979, after Russia’s gas cut in 2022, the inflation and growth effects played out over 12 to 18 months even after the immediate crisis eased. Supply chains reprice slowly. Frozen capex doesn’t unfreeze overnight. And the infrastructure spending response — governments and corporations rebuilding energy resilience — takes years. Even if the Strait reopens next month, the lesson this war has taught is not one the world forgets quickly. That’s what’s driving my thinking.
Why I’m Looking at Honeywell (HON)
So why Honeywell specifically?
Most people outside of investing circles have never heard of Honeywell (NASDAQ: HON) — or if they have, they associate it with industrial controls and building systems. Not exactly exciting. But that’s the point. Under CEO Vimal Kapur, Honeywell is in the middle of a deliberate and aggressive identity change. The goal is to shed the “slow industrial” label and replace it with something closer to a high-tech software and AI infrastructure company. The company is still evolving — and that evolution journey is exactly what interests me as an investor.
Sales grew 7% in 2025, and for 2026 management is guiding 3–6% — more modest, partly because the company is in the middle of major restructuring. But orders came in 23% higher last quarter — nearly double the typical pace — building a backlog of over $37 billion. For a long-cycle business like Honeywell, orders today become revenue in 2027 and 2028. The near-term picture is steady. The medium-term pipeline is where it gets interesting.
Let me walk through what’s actually changing inside the business.
The breakup is the starting point, not the whole story
In February 2025, Honeywell’s board officially announced it would split into separate companies. The paperwork is filed with the SEC, leadership teams are in place, and Honeywell Aerospace will list on Nasdaq under the ticker HONA — targeted for Q3 2026. After the split, Honeywell Automation focuses on industrial software and process control. Honeywell Aerospace, with technology on 90% of commercial aircraft and 70% of military aircraft worldwide, stands alone as one of the largest pure-play aerospace suppliers in the world. Conglomerates consistently trade below the sum of their parts. Once separated, each business gets repriced on its own merits. Buying now means getting in before each piece gets valued on its own merits. My first checkpoint is the Honeywell Aerospace Investor Day on June 3 in Phoenix, where management sets standalone margin targets. The Honeywell Automation Investor Day follows on June 11.
Defence is ramping hard — and the Iran war accelerated it
In March 2026, Honeywell signed a framework agreement with the US Department of War, committing $500 million to scale up production of navigation systems, missile actuation, and electronic warfare components. It was among the first Tier 1 suppliers to sign this kind of agreement. There’s also a direct Singapore angle — Honeywell signed an MOU with ST Engineering (SGX: S63) in February to modernise defence aviation across Asia-Pacific — retrofitting military aircraft with new avionics. With global defence budgets expanding and the Iran war underscoring the urgency, Honeywell’s aerospace backlog is filling up fast.
The energy security tailwind is real and already in the order book
Every government and corporation just learnt a hard lesson about depending on one chokepoint for 20% of their energy supply. The structural response — years of spending on LNG infrastructure, grid modernisation, and building efficiency — is exactly what Honeywell’s process technologies and building automation segments sell. Data centres and healthcare are already expanding at 2.5 to 3x the pace of the rest of its Building Automation segment. These aren’t projections — they’re already sitting in the backlog.
There’s a hidden asset most people overlook
Honeywell owns a 54% stake in Quantinuum — one of the more credible names in quantum computing. In January 2026, Honeywell announced Quantinuum has filed confidential IPO paperwork with the SEC. Analysts have floated valuations north of $10 billion for the business. To be clear — quantum computing is still years from broad commercial viability, and I’m not buying HON for Quantinuum alone. But an IPO later this year could surface value that’s currently buried inside Honeywell’s balance sheet and invisible to most investors.
The financials support the thesis
Net margin around 13%, ROE above 26%, free cash flow of $5.1 billion in 2025, up 20% year on year. The balance sheet carries meaningful debt at a D/E ratio of around 1.4, but interest coverage is nearly 8 times — the debt is well-serviced. This isn’t a turnaround story. It’s a well-run business in the middle of a deliberate transformation.
The risks are real too. Near-term sales growth is guiding lower — 3–6% for 2026 versus 7% last year, partly due to spinoff transition costs and project timing. The war itself is hitting HON’s Q1 revenue by 7–9% through shipping delays and site disruptions in the region. The spinoff, while well advanced, is still subject to regulatory and board approvals. And the energy security spending wave could take longer to materialise if the conflict resolves quickly. I’m going in with eyes open on all of this.
What I’m Planning — And How I’m Thinking About It
To be clear — none of these moves have been made yet. This is my thinking, not my trade confirmation.
Here’s where things stand.
ALB has been one of my higher-conviction holdings — a pure-play lithium producer I’d built up to around 20% of my portfolio. When the war broke out and commodities rotated out, I used that volatility to trim in small tranches, bringing it from roughly 20% down to about 14%.
I didn’t sell because the thesis broke — lithium demand is projected to grow 15–40% in 2026, energy storage installations grew over 50% in 2025, and the IRA credits remain intact. The trimming was pure concentration discipline. I plan to continue reducing patiently toward a single-digit weighting, but there’s no rush — I’ll let the price come to me.
NOG was a 2025 strategy position — a US-based non-operator oil company with zero Hormuz exposure, solid fundamentals, and a good dividend yield. With my 2026 focus firmly on Industrials, Healthcare, and Consumer Discretionary, a legacy oil and gas position no longer fits. The war handed me an exit opportunity well above my original entry, accelerating a repositioning I was already planning. I’ve sold a significant portion into strength already. The remaining position has a limit order sitting in Saxo — I’ll let it do the work. Whether Trump’s two-to-three week exit timeline triggers a sharp oil pullback before my order hits is something I’m watching closely.
I’ll build the HON position using the NOG and ALB proceeds, gradually over the next three to six months, with three checkpoints guiding when and how much I add:
April 23 — HON Q1 2026 earnings. Management has already flagged a 7–9% Q1 revenue hit from Middle East disruptions — shipping delays and some site closures in the region. They’ve maintained full-year guidance, calling it a timing issue not a demand issue. April 23 tells me whether that holds.
June 3 — Honeywell Aerospace Investor Day in Phoenix. Management sets standalone margin targets for the aerospace business. This is the one I want to be positioned before.
June 11 — Honeywell Automation Investor Day. The transformation story for the remaining business gets laid out in full.
Q3 2026 — Aerospace spinoff completes. When this happens, the market has to value three separate businesses instead of one conglomerate. That’s the moment.
I’ll update as each one lands.
It is not financial advice. The author may hold positions in securities discussed. Readers should conduct their own due diligence and consult with a qualified financial advisor before making investment decisions.