Iran War Sparks Surge in Energy and Defense ETFs

Energy and Defense ETFs Lead Flows as Iran War Jolts Markets

The first full week of the war involving Iran triggered sharp rotations across commodity and thematic ETFs as investors repositioned portfolios around supply shocks, inflation risks and geopolitical uncertainty.

Oil markets were at the center of the move. Prices surged above $100 per barrel for the first time since 2022 after tanker traffic through the Strait of Hormuz was effectively blocked, disrupting a critical artery for global energy shipments. Several major Middle Eastern producers began curbing output as exports slowed and storage filled, intensifying fears of a prolonged supply squeeze.

ETF flows mirrored this shift in sentiment. Energy, crude oil and defense funds attracted strong inflows during the week, while strategic metals declined despite their traditional role as geopolitical hedges.

Energy ETFs absorb inflation hedge demand

Energy ETFs were among the primary beneficiaries of the shock.

Across the sector, assets total roughly $8.4bn, with funds delivering 2.8% gains during the week and more than 25% returns year-to-date. Investors added nearly $793m over the week alone, pushing total inflows above $2bn in 2026.

The rally reflects the surge in both WTI and Brent crude, which climbed sharply as supply disruptions spread across the region.

Commodity-tracking ETFs captured much of the move. The WisdomTree WTI Crude Oil ETC (CRUD) gained more than 26% during the week and nearly 48% year-to-date while attracting over $100m in fresh inflows. The WisdomTree Brent Crude ETC (BRNT) rose almost 30% during the same period, pushing year-to-date gains above 57%.

Natural gas also rallied as traders priced in potential disruptions to liquefied natural gas shipments. The WisdomTree Natural Gas ETC (NGAS) advanced nearly 13% during the week and drew close to $20m in inflows.

Defense and cybersecurity ETFs gain on conflict risks

Defense-themed ETFs also rallied as investors anticipated rising military spending and prolonged geopolitical tensions.

The global defense ETF segment delivered 4.7% weekly gains and has now returned nearly 18% year-to-date. The largest product in the space, the VanEck Defense UCITS ETF (DFEN), managing more than $7.5bn, rose 3.8% during the week and remains up over 14% this year. The fund has attracted roughly $467m in inflows in 2026 as investors increasingly view defense exposure as a structural allocation during periods of geopolitical instability.

Cybersecurity ETFs also moved higher amid growing fears of digital retaliation. Analysts warn that Iran-aligned hacker groups could escalate cyberattacks targeting government and infrastructure networks¹.

The L&G Cyber Security UCITS ETF (ISPY) climbed more than 8% during the week, while the First Trust Nasdaq Cybersecurity UCITS ETF (CIBR) gained roughly 7.5%. Despite the strong performance, flows remained mixed, suggesting investors are still cautious after earlier volatility in the sector.

Strategic metals decline despite geopolitical tensions

Precious and industrial metals moved in the opposite direction.

The strategic metals ETF segment fell nearly 8% during the week even as energy markets rallied. The sector still remains up more than 21% year-to-date and has attracted over $1.2bn in inflows in 2026.

Gold slipped toward $5,100 per ounce as a stronger dollar and rising bond yields offset safe-haven demand. Silver also weakened, pressured by concerns that higher energy costs could slow global industrial activity. Copper futures fell to multi-week lows as traders worried that prolonged geopolitical disruption could dampen global growth.

These pressures were reflected in ETF performance. The VanEck Rare Earth and Strategic Metals UCITS ETF (VVMX) declined about 6.4% during the week, although it remains one of the strongest performers this year with gains exceeding 31%.

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Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.

¹ Morningstar – (https://www.morningstar.com/news/marketwatch/20260304212/here-are-the-hottest-cybersecurity-stocks-as-the-iran-conflict-rages)