Iran War: How Global Markets Are Repricing A New Energy Shock

Four days into the U.S.-led attack on Iran, global equity markets are drawing a fault line.

Two trading sessions have been enough to separate the world into two camps: energy producers and energy importers. The gap between them is widening with every barrel that fails to clear the Strait of Hormuz.

What Happened Thus Far

The U.S. and Israel launched a joint military operation against Iran on Saturday morning, striking Iranian Supreme Leader Ali Khamenei and killing several senior regime figures.

Iran responded swiftly, launching retaliatory strikes against U.S. bases, embassies, airports and energy infrastructure across the Middle East.

Iranian sources subsequently declared the Strait of Hormuz closed — the narrow choke point through which roughly 20% of global crude oil and liquefied natural gas flows every day.

Oil prices surged 13% across two sessions, the biggest two-day move since March 2022. President Donald Trump warned the conflict could last four weeks or more.

On Tuesday, Trump ordered the U.S. Development Finance Corporation to provide political risk insurance and financial guarantees for all maritime trade transiting the Gulf.

He also warned that the U.S. Navy stands ready to escort tankers through the Strait of Hormuz, adding that more actions are to come.

Exposed ETFs

According to CountryETFTracker.com data:

• The iShares MSCI South Korea ETF (NYSE:EWY) has plunged 12.54% since the Feb. 27 close, making it the world’s worst-performing major country fund. South Korea is acutely exposed — it imports nearly all of its crude oil and a significant share of its LNG through the very routes now disrupted.

• The iShares MSCI South Africa ETF (NYSE:EZA) fell 9.90%, the Global X MSCI Greece ETF (NYSE:GREK) dropped 9.68% and the iShares MSCI Chile ETF (NYSE:ECH) lost 9.13%.

• Despite its energy link, the iShares MSCI UAE ETF (NYSE:UAE) declined 7.78% due to collateral damage from Iranian strikes on Dubai and Abu Dhabi airports that turned the region’s most globalized economy into an unwilling front in the conflict.

• The iShares MSCI Spain ETF (NYSE:EWP) dropped 7.29%, compounded by President Trump’s directive to Treasury Secretary Scott Bessent to sever all trade dealings with Madrid following Spain’s refusal to cooperate in the conflict.

• The iShares MSCI Mexico ETF (NYSE:EWW) fell 6.89% and the iShares MSCI Poland ETF (NYSE:EPOL) lost 6.79%.

Insulated ETFs

• The iShares MSCI Israel ETF (NYSE:EIS) has gained 4.39%, as markets began unwinding the geopolitical risk premium that has weighed on Israeli equities for years,

• The Global X MSCI Norway ETF (NYSE:ENOR) is essentially flat, benefiting from Norway’s status as a major non-Middle Eastern oil and gas exporter.

• The S&P 500 – as tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY) – fell by just 0.9% in two sessions, insulated by the U.S. economy’s domestic energy production base, the dollar’s safe-haven bid and a rotation into defense names that are direct beneficiaries of the new environment.

• Saudi Arabia – tracked by the iShares MSCI Saudi Arabia ETF (NYSE:KSA) was only 1.3% lower, as the kingdom’s massive crude production capacity positions it as a potential supply beneficiary if Iranian output remains offline.

• The iShares MSCI Canada ETF (NYSE:EWC) declined just 1.62%, also insulated by its own energy production base.

Across two sessions, a single variable is explaining most of the dispersion in global equity returns: energy trade balance. Countries that produce more than they consume — Norway, Canada, Saudi Arabia — are holding.

Countries that import nearly all of it — South Korea, Greece, Thailand — are selling off.

Country ETF Performance Since Feb. 27 Close

Top 10 Losers

Top 5 Performers

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