Iran ETF Playbook: Portfolio considerations for two potential Middle East scenarios

Geopolitical events can create sudden swings in markets, particularly when they involve the Middle East, a region responsible for around a third of global oil supply. The key transmission channel to markets is typically energy prices, which have whipsawed this past week on mixed messages from the Trump administration and Tehran’s defiance. Curtailing global oil supply can quickly influence inflation expectations, central bank policy and the global growth outlook.

While predicting geopolitical outcomes is notoriously difficult, investors can think through how portfolios might behave across different scenarios and may want to consider some measured tactical positions.

Below I outline two potential paths for markets: a prolonged conflict and disruption to global oil supply, or a de-escalation within a matter of weeks, and highlight ETFs that may help investors position accordingly.

These scenarios are illustrative only and not predictions. The ETFs referenced are examples of exposures and are not recommendations. In some instances, we look to previous periods of market stress to illustrate how certain exposures have behaved historically. Investors should form their own view as to the relevance of historical examples, noting that conditions are never exactly the same, and that past performance is not indicative of future performance.

Scenario 1: Prolonged conflict and ongoing disruption to the oil supply

If tensions escalate and oil shipments through the Strait of Hormuz face sustained disruption, energy prices may remain elevated for some time. Even if Trump succeeds in dismantling Iran’s nuclear program and triggering regime change, the outcome could still create a power vacuum in which factions within Iran continue to threaten energy shipments.

If you are looking for the single most important indicator of risk in this crisis, it’s the price of oil. Oil’s reaction has been volatile, but some investors have tried to use it as a “geopolitical hedge” for when other asset valuations come under pressure.

OOO Crude Oil Index Currency Hedged Complex ETF

• The Australian ETF that offers the most direct exposure to changes in the price of oil.
• Aims to track the performance of an index of WTI oil futures (before fees and expenses), hedged for currency movements in the AUD/USD exchange rate.¹
• When a jump in the oil price results in a potential sell-off in other assets, a gain in OOO may partially offset losses elsewhere in a portfolio. This ETF produced a record 1 day ETF price gain on 9 March 2026, when oil shot up to nearly US$120 per barrel and Australian equities experienced their largest fall since COVID. However, OOO also fell by nearly as much the following day and has been very volatile during this episode, highlighting the risk of oil-linked exposures.²

Beyond the current oil price, there are other assets and financial markets that arguably don’t yet reflect the risk of an extended oil disruption or second order effects. And there are ETFs that may be worthy of consideration if you expect a prolonged conflict and ongoing oil crisis.

FUEL Global Energy Companies Currency Hedged ETF

• Global energy majors: Provides exposure to some of the world’s largest oil and gas producers, with significant production outside the Gulf region.
• While front month oil futures are up ~50% since 27 February, the futures prices for oil for delivery in 2027 remain at or below USD80 per barrel, as at 17 March 2026.
• By comparison FUEL has appreciated by a more modest 7% between 27 February and 17 March 2026. Analyst valuation models for energy companies are driven by longer-term oil price assumptions rather than the volatile current spot price, but longer dated futures and analyst assumptions may reset higher the longer this war drags on.²  Of course, should there be a quick resolution and global oil supply becomes less constrained, long term oil price assumptions may in fact decrease and the share prices of energy companies could fall.

FOOD Global Agriculture Companies Currency Hedged ETF

• Exposure to the global food supply chain: includes companies involved in agricultural equipment, fertilisers and food production.
• Liquefied Natural Gas (LNG) is a critical raw material used to make nitrogen-based fertilisers and the Gulf countries are major fertiliser producers.
• Approximately a third of global fertiliser supply passes through the Strait of Hormuz and agricultural companies based in the US and elsewhere are already boosting prices in response to increasing demand from farmers.
• Q1 2022 provides an historical example of another period when fertiliser prices spiked on a shortage of global LNG supply. When Russia invaded Ukraine, global equity markets experienced a significant correction amid heightened inflationary pressures. FOOD rallied for that quarter, although it subsequently fell in Q2 on lower fertiliser prices and inflation expectations.³

UTIP Inflation-Protected U.S. Treasury Bond Currency Hedged ETF

• Invests in US Treasury Inflation-Protected Securities (TIPS), which are one of the most direct ways to hedge against a stagflationary environment (higher inflation, lower growth) that a prolonged oil crisis may create.
• Despite the magnitude of the risk, long term inflation expectations based on market pricing have not increased materially. But Morgan Stanley suggests that can change quickly.
• Under a ‘long war’ scenario, UTIP has the potential to produce positive returns as inflation expectations adjust and to then benefit from higher realised inflation over time, which would mechanically increase the principal value of TIPS.  
• Although it’s important to note that UTIP’s shorter-term returns may be impacted by interest rate movements and also may not perform as expected over the longer term if inflation outcomes differ.

QAU Gold Bullion Currency Hedged ETF

• At the outbreak of the crisis, gold initially appreciated but then sold off as expectations of US rate cuts were pushed out and the US dollar strengthened.
• We have seen before, for example in the March 2020 COVID crash and after ‘Liberation Day’ last year, gold being sold off early as a source of liquidity. After these initial liquidity-driven sell offs, gold subsequently rallied strongly once investors had recalibrated portfolios for the higher volatility environment. However the price of gold can be influenced by many drivers, it has not always followed this pattern and could decline or remain subdued.
• The long-term case for gold appears to have grown stronger. If the US is prepared to be more militarily assertive it arguably reinforces the incentive for other world powers to shift their reserves from US dollar assets to gold.

Scenario 2: Rapid de-escalation and resumption of shipping through the Strait of Hormuz

If tensions ease quickly and shipping through the Strait of Hormuz resumes uninterrupted, oil prices could retrace and the geopolitical risk premium embedded in markets may fade. In that environment, global equities and cyclical sectors could benefit from improving sentiment and a renewed focus on economic growth. A rising tide lifts all boats and one might expect all equity markets to rally, but below we identify some of the higher beta opportunities for such a recovery.

BEMG MSCI Emerging Markets Complex ETF

• Sensitivity to global growth: History shows that emerging markets often perform strongly when global risk appetite improves and trade flows normalise.
• Emerging markets like South Korea had been amongst the top performers in January and February, however they also sold off the hardest as conflict in the Middle East escalated. Provided that the disruption to oil supplies is contained, emerging markets could maintain their strong underlying fundamentals, making for a potentially attractive entry point.
• A resolution of the crisis could see the US dollar weaken, which may provide a tailwind for emerging markets.

EXUS Global Shares Ex US ETF

• European and Japanese equity markets have been hit harder than the US, given these countries’ reliance on imported oil and LNG.
• Ex-US equities provide greater exposure to cyclical sectors like financials and industrials than the US equity market and, as such, greater exposure to a strong global growth environment.
• EXUS is the only ETF on the ASX which provides Ex-US, Ex-Australia developed global market equities exposure.

GEAR Geared Australian Equities Complex ETF

• For investors who believe Iran represents another TACO (Trump Always Chickens Out) moment, using leverage can amplify returns if equities rally following improving sentiment.
• GEAR provides between 200-286% exposure to the daily returns of the S&P/ASX 200, which can magnify both gains and losses and is only suited to investors with a very high risk tolerance.
• We’ve seen geared equity ETFs being used by investors during past periods of market volatility. For example, at the market lows after the Liberation Day sell off last year we saw increased buying of geared equity ETFs. In that instance, as equity markets recovered those ETF products amplified gains for their investors. However, it’s important to recognise that investing in a geared investment, rather than an ungeared investment, involves significantly higher risk, particularly during a period of elevated volatility.

Two-way bets: Exposures that may benefit under a range of potential outcomes

ARMR Global Defence ETF

• Exposure to leading defence contractors headquartered in NATO member and major NATO ally countries (such as Australia, Japan and South Korea).
• Regardless of the outcome of this conflict, Iran’s ability to retaliate using mass drone and missile strikes proves that even the US military needs to restock and retool defensive capabilities for an evolving threat landscape.
• On 6 March 2026, Trump met with executives from major defence companies, including Lockheed Martin, RTX (Raytheon), Northrop Grumman, L3Harris and BAE Systems – all current holdings in ARMR, to discuss expanding weapons production.
• Trump said the companies agreed to quadrupling output of some advanced “precision-guided” weapons, which have been depleted by high usage rates in the Iran conflict and Ukraine, particularly interceptor missiles used in air and missile defence systems.

XMET Energy Transition Metals ETF

• Exposure to a portfolio of the world’s largest critical mineral producers.
• Short-term pain: XMET is down ~10% since hostilities started, as energy and more specifically diesel, is a big input cost for mining operations. In addition, copper prices are very sensitive to global growth sentiment.
• Long-term opportunity: However, this conflict serves to highlight the vulnerability of global oil and LNG supply chains and focusses attention on energy security.
• Reducing dependence on Middle East oil requires greater supply of critical minerals for renewables, batteries, electrification, as well as advanced defence technology.

URNM Global Uranium ETF

• Exposure to leading global uranium miners and trusts that hold physical uranium.
• The sell off in uranium mining stocks early in this crisis is a result of the broad risk-off environment and a rotation into oil and gas stocks, that are viewed as more immediate beneficiaries. However, this reaction ignores the longer-term potential tailwinds such a crisis can provide for uranium miners.
• The 1973 oil crisis resulted in a significant increase in the construction of nuclear power plants in countries like France and Japan, in order to reduce their reliance on Middle Eastern oil. Already South Korea is racing to restart nuclear reactors currently undergoing maintenance to secure energy in response to the current conflict.
• Supply-demand dynamics: Uranium markets remain structurally tight following years of underinvestment in production. Many governments increasingly view nuclear as a reliable energy source and AI-related electricity demand is also expected to grow significantly.

Sources:

1. Please note the price of oil futures contracts is not the same as the “spot price” of oil. As such, OOO does not aim to provide the same return as the performance of this spot price. The performance of an ETF that is linked to oil futures may be materially different to the performance of the spot price of oil itself. This is because the process of “rolling” from one futures contract to the next to maintain investment exposure can result in either a cost or benefit to the Fund, affecting returns. Please refer to the PDS for further information. ↑

2, 3. Past performance is not necessarily indicative of future performance ↑