On February 28, “Operation Epic Fury” fundamentally changed the geopolitical landscape: US and Israeli forces coordinated and continue to attack Iranian targets, eliminating revolutionary leader Khamenei and targeting the country’s nuclear program.
The reactions on the financial markets followed quickly and were asymmetrical.
While the S&P 500 initially hardly acknowledged the development, the price of Brent crude oil shot up, which put the European indices under significantly greater pressure due to Europe’s high dependence on energy imports. The decisive factor for the price reaction is the practically complete blockage of the Strait of Hormuz, through which around 20 percent of global oil trade is carried out.
The question for investors is which sectors could structurally benefit from this escalation. Three areas stand out. First, the energy sector: higher oil prices directly expand the margins of oil and gas producers and the supply shortage is likely to persist as long as the conflict remains unresolved.
Secondly, the defense sector. Not only are the direct participants in the war increasing their arms spending, the entire NATO area and countries such as South Korea are using the conflict as an opportunity for permanently higher defense budgets. A third focus industry driven by conflict: cyber security. The Iran war is also a war in the digital space. State and non-state actors are intensifying attacks on critical infrastructure, financial systems and military communications, and the demand for protective technologies is likely to increase structurally. Strong ETF solutions are once again available to investors for implementation and risk diversification.
The iShares Oil & Gas Exploration & Production UCITS ETF (ISIN IE00B6R51Z18 / WKN A1JKQL) tracks the S&P Commodity Producers Oil & Gas Exploration & Production Index and thus focuses specifically on companies that explore and produce oil and gas, i.e. that part of the value chain that has the strongest leverage effect when raw material prices rise. The fund volume is 460 million euros, the annual total expense ratio is 0.55 percent. Among the 64 positions, Canadian Natural Resources (10.51 percent), ConocoPhillips (9.10 percent) and EOG Resources (8.68 percent) lead the portfolio.
The HANetf Future of Defense UCITS ETF (ISIN IE000OJ5TQP4 / WKN A3EB9T) is one of the largest defense ETFs on the market with a fund volume of EUR 2,797 million and tracks the EQM Future of Defense Index. The total expense ratio is 0.49 percent annually, the income is retained, and the replication takes place physically. A portfolio is spread across 60 positions and includes classic defense companies such as RTX (4.79 percent), BAE Systems (4.76 percent) and Northrop Grumman (4.51 percent) as well as technology companies with defense relevance such as CrowdStrike (4.77 percent) and Palantir (4.38 percent).
The First Trust Nasdaq Cybersecurity UCITS ETF Acc (ISIN IE00BF16M727 / WKN A2P4HV) is the only ETF that tracks the Nasdaq CTA Cybersecurity Index and thus brings together 31 specialized companies from the digital security sector. The fund volume is 989 million euros, the TER is 0.60 percent annually. Income is retained and replication is completely physical. The five largest positions Broadcom (10.86 percent), CrowdStrike (9.62 percent), Cisco Systems (8.92 percent), Infosys (8.32 percent) and Palo Alto Networks (7.99 percent) together cover around half of the portfolio. Last year’s price weakness of around 8.6 percent is likely to represent an entry opportunity for long-term investors rather than a structural problem, as demand for cybersecurity solutions is likely to continue to rise rapidly.
Conclusion: Within just a few days, the Iran conflict has brought three investment themes into focus that complement each other: oil and gas production as a direct beneficiary of rising raw material prices, defense as a reaction to a permanently increased geopolitical risk situation and cyber security as a structurally growing companion of modern warfare.
