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Are the Odds of a Wider Middle East Conflict Rising? ETFs to Consider
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Key Takeaways
The U.S. extended its air campaign into a ninth straight day as ceasefire hopes continued to fade.
The risk of broader military escalation in the Middle East continues to weigh on market sentiment.
Rising Middle East tensions could favor value, healthcare, defense and energy funds.
The standoff between Washington and Tehran remains unresolved, with hopes for a near-term de-escalation fading. With military exchanges becoming more intense and disputes over the Strait of Hormuz remaining unresolved, the interim ceasefire appears to have collapsed, raising the risk of a broader regional conflict.
According to Bloomberg, as quoted on a Yahoo Finance article, military tensions continued to escalate as the United States extended its air campaign against Iran into the ninth straight day, aiming to force Tehran to end attacks on shipping and restore access through the Strait of Hormuz. Meanwhile, Iran continued retaliatory attacks on U.S. military bases across Kuwait, Jordan, Bahrain and Iraq.
As quoted on a Reuters article, President Trump said the latest strikes were carried out in retaliation for American military casualties.
Additionally, according to the New York Times, as quoted on Bloomberg and cited in the abovementioned Yahoo Finance article, in a further show of force, the United States is deploying more warplanes to the Middle East, including F-35 and F-16 fighter jets, as well as aerial refueling aircraft.
The conflict also expanded to civilian infrastructure, with attacks on desalination facilities increasing the risk of water shortages across parts of the Gulf, as per the abovementioned Reuters article. While the conflict continues to escalate, neither Washington nor Tehran appears to have abandoned diplomacy, with both sides separately signaling their openness to renewed negotiations.
However, based on the trajectory of the conflict, the balance of risks appears to be tilting toward further military escalation rather than a near-term ceasefire or a lasting diplomatic solution. Last week, President Trump warned that the United States would escalate airstrikes and broaden its military campaign unless Iran stopped targeting ships transiting the Strait of Hormuz, as quoted on the Yahoo Finance article.
ETFs to Consider
Below, we highlight a few funds that could benefit if tensions in the Middle East persist or escalate into an all-out war.
Value ETFs
Value ETFs focus on stocks characterized by strong fundamentals and robust financial health, which trade below their intrinsic value. Investors can leverage value investing, a strategy particularly compelling in the current economic environment. According to a Reuters article, value funds continued to attract investors in the week ended July 15, pulling in $3 billion for the third consecutive week.
Investors can consider Vanguard Value ETF (VTV - Free Report) and Schwab U.S. Large-Cap Value ETF (SCHV - Free Report) . All the abovementioned funds have a Zacks ETF Rank #1 (Strong Buy). Regarding charging annual fees, VTV is the cheapest option, charging 0.03%. VTV has gathered an asset base of $185.44 billion, the largest asset base between the two.
Healthcare ETFs
The healthcare sector is non-cyclical, providing a defensive tilt to the portfolio amid market turmoil. As per the abovementioned Reuters article, in the week ended July 15, healthcare funds pulled in $465 million.
Investors can look at funds like Health Care Select Sector SPDR Fund (XLV - Free Report) and Vanguard Health Care ETF (VHT - Free Report) . All the abovementioned funds have a Zacks ETF Rank #1. Regarding charging annual fees, XLV is the cheapest option, charging 0.08%. XLV has gathered an asset base of $4096 billion, the largest asset base between the two.
Defense ETFs
Defense ETFs could be well-positioned in the current environment, as the sector has historically outperformed during periods of heightened geopolitical tensions and increased military activity.
Investors can consider iShares U.S. Aerospace & Defense ETF (ITA - Free Report) and Invesco Aerospace & Defense ETF (PPA - Free Report) . All the abovementioned funds have a Zacks ETF Rank #2 (Buy). Regarding charging annual fees, ITA is the cheapest option, charging 0.38%. ITA has gathered an asset base of $13.96 billion, the largest asset base between the two.
Energy ETFs
With the recent military exchanges, shipping through the Strait of Hormuz has again been disrupted, pushing oil prices higher. Both West Texas Intermediate (WTI) crude and Brent crude surged, taking their gains over the past five trading sessions to 2.83% and 3.38%, respectively.
Investors can consider State Street Energy Select Sector SPDR ETF (XLE - Free Report) and Vanguard Energy ETF (VDE - Free Report) . All the abovementioned funds have a Zacks ETF Rank #1. Regarding charging annual fees, XLE is the cheapest option, charging 0.08%. XLE has gathered an asset base of $37.4 billion, the largest asset base between the two.
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Are the Odds of a Wider Middle East Conflict Rising? ETFs to Consider
Key Takeaways
The standoff between Washington and Tehran remains unresolved, with hopes for a near-term de-escalation fading. With military exchanges becoming more intense and disputes over the Strait of Hormuz remaining unresolved, the interim ceasefire appears to have collapsed, raising the risk of a broader regional conflict.
According to Bloomberg, as quoted on a Yahoo Finance article, military tensions continued to escalate as the United States extended its air campaign against Iran into the ninth straight day, aiming to force Tehran to end attacks on shipping and restore access through the Strait of Hormuz. Meanwhile, Iran continued retaliatory attacks on U.S. military bases across Kuwait, Jordan, Bahrain and Iraq.
As quoted on a Reuters article, President Trump said the latest strikes were carried out in retaliation for American military casualties.
Additionally, according to the New York Times, as quoted on Bloomberg and cited in the abovementioned Yahoo Finance article, in a further show of force, the United States is deploying more warplanes to the Middle East, including F-35 and F-16 fighter jets, as well as aerial refueling aircraft.
The conflict also expanded to civilian infrastructure, with attacks on desalination facilities increasing the risk of water shortages across parts of the Gulf, as per the abovementioned Reuters article. While the conflict continues to escalate, neither Washington nor Tehran appears to have abandoned diplomacy, with both sides separately signaling their openness to renewed negotiations.
However, based on the trajectory of the conflict, the balance of risks appears to be tilting toward further military escalation rather than a near-term ceasefire or a lasting diplomatic solution. Last week, President Trump warned that the United States would escalate airstrikes and broaden its military campaign unless Iran stopped targeting ships transiting the Strait of Hormuz, as quoted on the Yahoo Finance article.
ETFs to Consider
Below, we highlight a few funds that could benefit if tensions in the Middle East persist or escalate into an all-out war.
Value ETFs
Value ETFs focus on stocks characterized by strong fundamentals and robust financial health, which trade below their intrinsic value. Investors can leverage value investing, a strategy particularly compelling in the current economic environment. According to a Reuters article, value funds continued to attract investors in the week ended July 15, pulling in $3 billion for the third consecutive week.
Investors can consider Vanguard Value ETF (VTV - Free Report) and Schwab U.S. Large-Cap Value ETF (SCHV - Free Report) . All the abovementioned funds have a Zacks ETF Rank #1 (Strong Buy). Regarding charging annual fees, VTV is the cheapest option, charging 0.03%. VTV has gathered an asset base of $185.44 billion, the largest asset base between the two.
Healthcare ETFs
The healthcare sector is non-cyclical, providing a defensive tilt to the portfolio amid market turmoil. As per the abovementioned Reuters article, in the week ended July 15, healthcare funds pulled in $465 million.
Investors can look at funds like Health Care Select Sector SPDR Fund (XLV - Free Report) and Vanguard Health Care ETF (VHT - Free Report) . All the abovementioned funds have a Zacks ETF Rank #1. Regarding charging annual fees, XLV is the cheapest option, charging 0.08%. XLV has gathered an asset base of $4096 billion, the largest asset base between the two.
Defense ETFs
Defense ETFs could be well-positioned in the current environment, as the sector has historically outperformed during periods of heightened geopolitical tensions and increased military activity.
Investors can consider iShares U.S. Aerospace & Defense ETF (ITA - Free Report) and Invesco Aerospace & Defense ETF (PPA - Free Report) . All the abovementioned funds have a Zacks ETF Rank #2 (Buy). Regarding charging annual fees, ITA is the cheapest option, charging 0.38%. ITA has gathered an asset base of $13.96 billion, the largest asset base between the two.
Energy ETFs
With the recent military exchanges, shipping through the Strait of Hormuz has again been disrupted, pushing oil prices higher. Both West Texas Intermediate (WTI) crude and Brent crude surged, taking their gains over the past five trading sessions to 2.83% and 3.38%, respectively.
Investors can consider State Street Energy Select Sector SPDR ETF (XLE - Free Report) and Vanguard Energy ETF (VDE - Free Report) . All the abovementioned funds have a Zacks ETF Rank #1. Regarding charging annual fees, XLE is the cheapest option, charging 0.08%. XLE has gathered an asset base of $37.4 billion, the largest asset base between the two.