'Economic Isolation' for Iran? ETFs to Gain/Lose

Strait Of Hormuz Remains The Biggest Risk

The Strait of Hormuz remains at the center of the crisis. Roughly one-fifth of the world’s oil and gas shipments pass through the waterway, making any prolonged disruption a major risk for crude prices, energy companies and inflation expectations. As a result, United States Brent Oil Fund LP BNO has surged by 76.1% so far this year (as of Aug. 13, 2026).

There is still little sign of a broader breakthrough in peacemaking between Washington and Tehran. Both sides are demanding concessions over control and access to the strait. The uncertainty is keeping an important risk premium in the oil market. Brent crude was trading near $87 a barrel.

ETFs to Gain/Lose

Against this backdrop, below we highlight a few ETF areas that could gain or lose from the scenario.

Energy ETFs to Soar?

Energy ETFs could be among the biggest beneficiaries if the new measures further restrict Iranian crude exports or increase the risk of a prolonged Strait of Hormuz disruption.

Higher crude prices generally improve the earnings outlook for U.S. oil and gas producers. While ETFs like BNO and United States Oil Fund LP USO are likely to gain, broad energy ETFs such as Energy Select Sector SPDR Fund XLE are also well-placed.

However, the direction of oil prices will depend on how much Iranian supply is actually removed from the global market. If the measures increase geopolitical risk without significantly reducing supply, the initial oil rally could fade.

Defense ETFs to Gain?

The geopolitical backdrop could also support defense ETFs. Any escalation or prolonged standoff could keep defense spending and weapons demand in focus. President Trump’s Fiscal Year 2027 budget proposes a record-breaking $1.5 trillion for the U.S. military— marking a huge 42% increase, per Politico. ETFs like iShares U.S. Aerospace & Defense ETF ITA could therefore remain on investors’ radar.

Inflation Could Complicate Fed’s Outlook?

A sustained oil-price jump would trigger global inflation and eventually affect consumer spending and business costs. That could make it harder for the Fed to ease monetary policy or stay put.

This creates a potential headwind for rate-sensitive ETFs, including those focused on small-cap ETFs like iShares Russell 2000 ETF IWM, real estate ETFs like Vanguard Real Estate Index Fund ETF VNQ and long-duration technology ETFs like State Street Technology Select Sector SPDR ETF XLK.

And if the Fed hikes rates to counter sticky inflation, niche ETFs like Simplify Interest Rate Hedge ETF PFIX should gain. PFIX is up 8.8% as the broader market feared a Fed rate hike in September.

Gold ETFs Could Benefit From More Uncertainty

Gold – the traditional safe-haven asset – could also attract investors if the Iran standoff becomes more prolonged. SPDR Gold Trust GLD could thus surge ahead.

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This article originally published on Zacks Investment Research (zacks.com).

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