Optimism around diplomatic progress between Washington and Tehran has supported a risk-on rally and lifted market sentiment. However, volatility continues to loom amid an uncertain geopolitical backdrop. Policymakers say the biggest risk is how long the conflict lasts.
While Donald Trump signaled that the war could end soon, mixed messaging from Washington and Tehran keeps the outlook unclear. Officials like Bank of France Governor François Villeroy de Galhau warn that prolonged uncertainty is likely to fuel inflation and weigh on growth, as quoted on CNBC.
Meanwhile, Iran has shut the Strait of Hormuz again, citing unmet U.S. obligations after briefly reopening it on Friday. Donald Trump said that the U.S. blockade of Iranian ports will continue. U.K. maritime authorities reported that Iranian forces fired on three tankers in the area, as quoted on CNBC.
Rising Stagflation Risks
A longer war could push inflation significantly higher while slowing growth. Policymakers fear that sustained energy disruptions – especially via the Strait of Hormuz – may trigger stagflation, a worst-case scenario for the global economy.
Energy Security in Focus
Leaders warn of a potential global energy crunch if supply routes are disrupted. Beyond oil, key materials like fertilizers and petrochemicals are at risk. Countries are now accelerating investments in renewables and nuclear while diversifying supply chains to reduce dependence, as mentioned in the same CNBC source (read: Iran War Seen as Reason for Shift to Renewable Energy: ETFs in Focus).
Markets Show Surprising Resilience: Will That Last?
Despite geopolitical tensions, global markets have remained stable, with equities rebounding strongly. However, policymakers caution that real economic impacts — especially supply disruptions — may emerge with a lag. Central banks face a highly uncertain environment, making it difficult to set clear policy paths.
Low-Volatility ETFs in Focus
Against this backdrop, we highlight a few low-volatility ETFs that investors may consider now.
ETFs in Focus
iShares MSCI USA Min Vol Factor ETF USMV
The underlying MSCI USA Minimum Volatility (USD) Index is composed of U.S. equities that, in the aggregate, have lower volatility characteristics relative to the broader U.S. equity market. The fund charges 15 bps in fees and yields 1.55% annually.
Invesco S&P 500 Low Volatility ETF SPLV
The underlying S&P 500 Low Volatility Index consists of the 100 stocks from the S&P 500 Index with the lowest realized volatility over the past 12 months. The fund charges 25 bps in fees and yields 2.08% annually.
iShares MSCI EAFE Min Vol Factor ETF EFAV
The underlying MSCI EAFE Minimum Volatility (USD) Index measures the performance of international equity securities that have lower absolute volatility. The fund charges 20 bps in fees and yields 2.96% annually.
Franklin International Low Volatility High Dividend Index ETF LVHI
The underlying QS International Low Volatility High Dividend Hedged Index is composed of equity securities of developed markets outside the United States with relatively high yield and low price and earnings volatility, while also mitigating currency fluctuations between the U.S. dollar and other international currencies. The fund charges 40 bps in fees and yields 4.51% annually.
iShares MSCI Global Min Vol Factor ETF ACWV
The underlying MSCI All Country World Minimum Volatility Index measures the combined performance of equity securities in both emerging and developed markets that have lower absolute volatility. The fund charges 20 bps in fees and yields 2.03% annually.
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iShares MSCI USA Min Vol Factor ETF (USMV): ETF Research Reports
iShares MSCI EAFE Min Vol Factor ETF (EFAV): ETF Research Reports
Franklin International Low Volatility High Dividend Index ETF (LVHI): ETF Research Reports
Invesco S&P 500 Low Volatility ETF (SPLV): ETF Research Reports
iShares MSCI Global Min Vol Factor ETF (ACWV): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).