Last month, Betashares provided a roadmap for investors based on two outcomes in The Middle East.
Yesterday, markets reacted positively to the news that Iran and the US have agreed to a conditional two-week ceasefire.
During this period, shipping traffic will be allowed through the Strait of Hormuz.
Image source: Getty Images
What did Iran and the US agree to?
According to The BBC, Trump said he had agreed to "suspend the bombing and attack of Iran for a period of two weeks" if Tehran agrees to reopen the Strait of Hormuz.
As a refresher, The Strait of Hormuz is a critical chokepoint for global oil shipments. Any threat or disruption there raises fears of reduced supply and higher energy prices.
In the past month, those concerns have rippled through global markets. Equities have largely fallen as investors worry about inflation, economic slowdown, and geopolitical instability.
However, following the ceasefire announcement, the S&P/ASX 200 Index (ASX: XJO) jumped 2.5%. Investors clearly perceived the news as the beginning of a potential resolution.
Elsewhere, the S&P 500 Index (SP: .INX) also climbed higher, shooting above its 200-day moving average for the first time since mid-March.
While it's important to note that there are still plenty of hurdles still to come, it's worth revisiting the ASX ETFs that Betashares have listed as potential beneficiaries of a de-escalation in the Middle East.
Betashares Msci Emerging Markets Complex Etf (ASX: BEMG)
According to Betashares Senior Investment Strategist Cameron Gleeson, history shows that emerging markets often perform strongly when global risk appetite improves and trade flows normalise.
A resolution of the crisis could see the US dollar weaken, which may provide a tailwind for emerging markets.
This ASX ETF provides exposure to large and mid-cap stocks across 24 emerging market countries.
Betashares Global Shares Ex Us Etf (ASX: EXUS)
This is the only ASX ETF which provides Ex-US, Ex-Australia developed global market equities exposure.
According to Betashares, Ex-US equities provide greater exposure to cyclical sectors like financials and industrials than the US equity market and, as such, greater exposure to a strong global growth environment.
This fund provides exposure to 900+ large and mid-cap companies from 22 developed markets excluding the US and Australia.
BetaShares Geared Australian Equity Fund (Hedge Fund) (ASX: GEAR)
This ASX ETF provides between 200-286% exposure to the daily returns of the S&P/ASX 200. This can magnify both gains and losses, and is only suited to investors with a very high risk tolerance.
According to Betashares, using leverage can amplify returns if equities rally following improving sentiment.
We've seen geared equity ETFs being used by investors during past periods of market volatility. For example, at the market lows after the Liberation Day sell off last year we saw increased buying of geared equity ETFs.
In that instance, as equity markets recovered those ETF products amplified gains for their investors. However, it's important to recognise that investing in a geared investment, rather than an ungeared investment, involves significantly higher risk, particularly during a period of elevated volatility.
