Retail investors rushed into two trades on Monday in the wake of the US and Israeli attacks on Iran. Retail investors transferred millions of dollars on a net basis to the State Street Energy Select Sector SPDR ETF (XLE) and Palantir in the first hour of trading Monday, according to Vandatrack. But the broader market did not see the same support from smaller traders, the investment data firm found. “The message from the tape is simple and clear,” Banda analyst Ashwin Bakre told CNBC. “This was not a mass panic. It was a selective repositioning.” The moves come as deals race to prepare for a potential long-term global conflict. A military action by the United States and Israel killed Iran’s supreme leader Ayatollah Khamenei, prompting retaliatory attacks by Middle Eastern countries. President Donald Trump has said the conflict could last several weeks. Gen. Dan Cain, chairman of the Joint Chiefs of Staff, said the fighting could result in additional military deaths. Retail investors bought $14 million worth of XLE funds in the first hour of trading, an increase of more than 425% compared to the same period on Friday. The ETF rose to a 52-week high in Monday trading as oil prices rose on concerns that the conflict would limit supply. “Retailers didn’t tiptoe around energy. They acted decisively,” Bakre said. “The size of the buying compared to Friday suggests that oil has quickly become the preferred geopolitical hedge in the open.”XLE ALL Mountain These small traders also poured more than $8 million into defense technology stock Palantir in 60 minutes. This marks a “dramatic change” from the more than $500,000 net shortfall seen in the first hour of Friday’s session, Bakre said. Palantir soared more than 6% in midday trading Monday, leading gains across the defense sector. By comparison, the iShares U.S. Aerospace and Defense ETF (ITA) rose more than 2%. Bakre said the stock “quickly restructured from a software growth moniker to a (defense) exposure.” “The speed of change is remarkable,” Banda said. Palantir was one of the most bought stocks by small investors last year. PLTR ITA 1D Mountain Palantir and ITA, 1 Day Selective and Defense No other popular play has seen such a boost. Retail investors remained net buyers of Nvidia stock in Monday morning trading. But in the first hour, net flows were down 76% compared to the most recent trading day. This is part of a trend of traders pulling back on exposure to riskier technology stocks amid heightened uncertainty, Bakre said. Interest in artificial intelligence trade has “obviously diminished,” but the group has not been completely abandoned, he said. The analyst said activity in the State Street SPDR S&P 500 Trust ETF (SPY) was “buoyant” but “mixed.” The S&P 500 rose back into positive territory in midday trading after falling more than 1% earlier in the day. “Right now, retailers aren’t just ‘buying the market,'” Bakre said. “They target specific themes rather than broad index exposure.” 2025 was a bumper year for retail traders thanks to buy-on-the-trend strategies. Bakre said Monday’s action shows the group is not selling stocks in a panic, but is buying strategically. They also become defensive, Banda found. For example, Bakre said demand for the iShares 0-3 Month Treasury Bond ETF (SGOV) and ProShares UltraPro Short QQQ (SQQQ) was high on Monday morning. “Retailers weren’t just spinning, they were actively hedging,” Bakre said.
