Geopolitical tensions flared on July 8, 2026, after Kuwait accused Iran of launching fresh missile and drone attacks, a day after the United States carried out retaliatory strikes against Iranian military targets. Kuwait's military said it was intercepting hostile missiles and drones, while neighboring Bahrain urged residents to seek shelter, as quoted on CNBC.
U.S. Retaliates to Strait of Hormuz Attacks
The U.S. Central Command said it struck more than 80 Iranian targets, including air defense systems, command centers, anti-ship missile sites and over 60 Islamic Revolutionary Guard Corps boats. Washington said the operation was in response to Iran's attacks on three commercial vessels transiting the Strait of Hormuz, calling the incidents a violation of the existing ceasefire.
Ceasefire Under Pressure
The latest exchange threatens the fragile memorandum of understanding (MOU) reached in June, which ended weeks of fighting and reopened the Strait of Hormuz after months of disruption. Iran accused Washington of violating the agreement, while the United States defended the strikes as necessary to protect international shipping.
President Donald Trump said that the U.S. ceasefire with Iran was over, and signaled that the U.S. would reimpose its naval blockade in the Strait of Hormuz, as quoted on CNBC.
ETF Strategies to Follow
Against the above-mentioned backdrop, investors may want to follow the below-mentioned ETF investment strategies to weather the latest round of geopolitical tensions.
Oil Price Jump Calls for Investment in Energy ETFs
Renewed geopolitical risks pushed oil prices higher on July 8 as investors worried about another disruption to traffic through the Strait of Hormuz, a vital global energy chokepoint. United States Brent Oil Fund LP BNO, ProShares Ultra Bloomberg Crude Oil UCO and ETF options are reliable plays in this scenario.
Focus on Dividends
Dividend-paying stocks provide a steady income stream and help mitigate potential losses during weaker market periods. These stocks offer the best of both worlds — safety in the form of payouts and stability in the form of mature companies that are less volatile to the large swings in stock prices. The companies that pay out dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis.
In particular, high-quality dividend stocks with a history of consistent dividend payments and growth can offer both income and the potential for capital appreciation over the long term. Vanguard Dividend Appreciation ETF VIG and iShares Core Dividend Growth ETF DGRO.
Try Low-Beta ETFs
Beta is a measure of a stock's volatility relative to the market. Low-beta stocks tend to have lower price fluctuations than the market, providing stability during market downturns. A beta of 1 indicates that the price of the stock or fund tends to move with the broader market. A beta of more than 1 indicates that the price tends to move higher than the broader market and is extremely volatile, while a beta of less than 1 indicates that the price of the stock or fund is less volatile than the market.
That said, low-beta products exhibit greater levels of stability than their market-sensitive counterparts and will usually lose less when the market falters. Core Alternative ETF CCOR and Innovator Defined Wealth Shield ETF BALT could be compelling picks.
Invest in Defensive Sectors
Some sectors, such as consumer staples, utilities and healthcare, tend to be less sensitive to economic cycles and more resistant to market downturns. These generally act as a safe haven during political and economic turmoil. Stocks in these sectors generally provide higher returns in troubled times.
Investors seeking exposure to these sectors could find Consumer Staples Select Sector SPDR ETF XLP and Vanguard Health Care ETF VHT intriguing picks.
Keep Track of Low-Volatility ETFs
Given the current climate, investors may consider adding the low-volatility ETFs to their watchlist. These funds focus on stable, less cyclical companies that can provide a buffer during market downturns. These ETFs include the likes of iShares MSCI USA Min Vol Factor ETF USMV and iShares MSCI Global Min Vol Factor ETF ACWV.
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Get it now >>State Street Consumer Staples Select Sector SPDR ETF (XLP): ETF Research Reports
Vanguard Health Care Index Fund ETF Shares (VHT): ETF Research Reports
United States Brent Oil ETF (BNO): ETF Research Reports
Vanguard Dividend Appreciation Index Fund ETF Shares (VIG): ETF Research Reports
ProShares Ultra Bloomberg Crude Oil (UCO): ETF Research Reports
iShares MSCI USA Min Vol Factor ETF (USMV): ETF Research Reports
iShares Core Dividend Growth ETF (DGRO): ETF Research Reports
iShares MSCI Global Min Vol Factor ETF (ACWV): ETF Research Reports
Core Alternative ETF (CCOR): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
