Markets have swung sharply over the last two days as military conflict involving the United States, Israel and Iran has intensified.
The S&P/ASX 200 Index (ASX: XJO) has fallen 3.2% so far this week while the S&P 500 Index (SP: .INX) has fallen 1%.
Yesterday was somewhat of a bloodbath for the ASX 200 which dropped 1.94%, marking for one of the worst single day drops in months.
A new report from Global X has shed light on the sectors and subsequent ASX ETFs that investors have been flocking to amidst this heavy volatility.
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Investors push further into safe-haven assets
Gold shares have continued to be a top pick for investors, following on from last year's momentum.
Gold climbed 2% higher on Wednesday and now sits almost 78% higher than 12 months ago.
Safe-haven assets typically maintain value even during economic uncertainty, so investors often flock to them when financial markets become volatile.
According to Global X, despite a two year rally for gold, the pace is not unprecedented.
In 2024-26, we have observed a very constructive environment for gold, with significant geopolitical volatility, falling interest rates, a poorer economic outlook and an increasing narrative around de-dollarisation.
The recent market volatility triggered by AI disruption in software, combined with the fresh risk of an energy shock and inflationary pressures stemming from US and Israel's attack on Iran, have added on top of that bullish environment new developments which look strikingly similar to the late 70s rally and may be the final tipping point that potentially triggers a gold supercycle in which there is sustained, strong outperformance.
Global X said in the short term, it believes markets are underpricing the risk of a dragged-out, sustained conflict in Iran, which could translate to persistently high energy prices that lead to stickier and hotter inflation and, in turn, complicate the rate path for the Federal Reserve and risk an economic downturn.
Defence and Energy also worth monitoring
Global X also reinforced that the world is increasingly operating in a Cold War framework, with sustained military modernisation across the US, Europe and parts of Asia.
Spending is also shifting toward defence technology, including missile systems, drones, cyber and AI-enabled capability. That creates a multi-year tailwind that is less cyclical and more policy-driven than traditional industrial demand.
Additionally, energy sits at the centre of this escalation because the Middle East remains critical to global supply and Asia remains structurally dependent on Gulf flows.
It said structurally this reinforces the case for energy security, LNG infrastructure and diversified supply.
How do investors access these themes?
For investors looking for exposure to gold, some ASX ETFs to consider include:
- Global X Physical Gold Structured (ASX:GOLD) – Mirrors the growth in the Australian dollar gold price.
- BetaShares Global Gold Miners ETF – Currency Hedged (ASX: MNRS) – Targets largest global gold mining companies (ex-Australia).
Energy focussed ASX ETFs to consider include:
- The Global X Bloomberg Commodity Complex ETF (ASX: BCOM)
- BetaShares Global Energy Companies ETF – Currency Hedged (ASX: FUEL)
For defence focussed ASX ETFs:
- The Global X Defence Tech ETF (ASX: DTEC)
- Betashares Global Defence ETF – Beta Global Defence ETF (ASX: ARMR)
- Vaneck Global Defence Etf (ASX: DFND).
Foolish takeaway
It's important to point out that despite investors pushing into these themes, there is no guarantee these sectors will rise as a direct result of current conflicts.
Predicting how markets respond to global conflict is inherently uncertain, and short-term sector moves are often driven by sentiment as much as fundamentals.
While capital may rotate into perceived "beneficiaries," there is no guarantee those trends will persist once conditions stabilise or new information emerges.
