The second quarter of 2026 kicked off on a shaky note, with the Iran war grabbing major headlines. However, the start of April showed signs of a ceasefire. The month-long Middle East conflict saw a temporary de-escalation on April 7, 2026, as Washington and Tehran agreed to a two-week ceasefire, offering short-term relief to markets.

However, last weekend’s negotiations in Pakistan between the United States and Iran fell apart. And President Trump ordered a U.S. blockade of the Strait of Hormuz (which is a key waterway for the passage of energy vessels) following the recent failure of U.S.-Iran negotiations.

The Strait has so far been almost closed/controlled by Iran. President Trump also issued warnings to Tehran over potential shipping fees in the Strait of Hormuz, per Bloomberg, as quoted on Yahoo Finance.

Against this backdrop, the S&P 500-based exchange-traded fund (ETF) (SPY Quick QuoteSPY - Free Report)  has added 3.7% so far this month (as of April 10, 2026). Let’s find out some sectors and their related ETFs that could be great picks for Q2

Energy – Zacks Rank #1

Energy markets had an amazing Q1 due to supply disruptions. Oil prices jumped by roughly 77% in the quarter. The (BNO Quick QuoteBNO - Free Report)  ETF skyrocketed by about 84% in Q1. The conflict involving the United States, Israel and Iran has disrupted the oil-rich Middle East.

Tehran’s near-total closure of the Strait of Hormuz has severely restricted global energy flows. Analysts noted that if the Strait remains closed for long, oil prices may rise sharply to destroy demand and rebalance markets (read: Oil Could Surge to $200 if Conflict Continues: Energy ETFs in Focus).

Per the latest update, the United States and Iran failed to reach an agreement after 21 hours of negotiations in Pakistan over the weekend. Even if we see a full-blown ceasefire in the future, the hit to the energy infrastructure in the Middle East will take a long time to be restored, and hence, the oil price is less likely to return to the pre-war level. This phenomenon is expected to support energy equities.

State Street SPDR S&P Oil & Gas Exploration & Production ETF (XOP Quick QuoteXOP - Free Report) , although down 5% last week, should be in focus, thanks to its solid Zacks Sector Rank.

Computer and Technology – Zacks Rank #2

War or not, the AI boom has been acting as a backbone of the information technology industry. The AI strength, in fact, is making up for weak PC and smartphone demand. President Trump’s order of a U.S. blockade of the Strait of Hormuz could help ease the stress mounting over the sector.

If the blockade remains successful, we can see a fall in oil prices, which should drag inflationary pressure down as well as lower the levels of interest rates globally. A low-rate scenario is always helpful for growth sectors like technology.

Roundhill Generative AI & Technology ETF (CHAT Quick QuoteCHAT - Free Report) added about 9% last week and is up for further gains due to continued advancements in the AI arena.

Consumer Discretionary – Zacks Rank #3

A contained inflationary backdrop despite the Iran war, a less hawkish Fed and decent economic growth should position the consumer discretionary sector in a better way.

The U.S. economy was tagged as a K-shaped economy in 2025, per CNBC. A K-shaped recovery occurs when higher earners are spending and driving economic growth, while lower-income Americans are cutting back on spending. With high-income earners unlikely to feel the pinch of a war-led economic pressure, the large-cap consumer discretionary sector should thus be in good shape.

However, Long, who was among the economists using the phrase “K-shaped,” has said that the economy is taking more of an “E-shape” in 2026, with three tiers of consumer behavior emerging instead of two. There is a middle group of people showing signs of mounting strain.

State Street Cons Disc Sel Sect SPDR Income ETF (XLY Quick QuoteXLY - Free Report) added 4.6% last week and may fetch investors’ attention in the upcoming days.

Utilities – Zacks Rank #4

The utility sector has been an area to watch lately, given investors’ drive toward safety in defensive investments, given the uncertain macroeconomic backdrop due to the Iran war. Being a low-beta sector, utility is relatively protected from large swings (ups and downs) in the stock market and is thus considered a defensive investment or safe haven amid economic or political turmoil.

Also, the explosive growth of AI in recent times has ignited a massive tailwind for utilities. This boom is directly tied to the burgeoning electricity demand from power-hungry data centers that are required to train and run AI models (read: AI Power Surge: Data Centers Energize Utility ETFs).

State Street Utilities Select Sector SPDR ETF (XLU Quick QuoteXLU - Free Report) inched up 1.8% last week and may be in a dependable position in the coming days.