ETFs to Play as Oil Surges Past $110 on Middle East Conflict

Oil prices topped $110 per barrel for the first time since the early phase of the 2022 Russia-Ukraine war, as quoted on Yahoo Finance, marking the fastest oil rally since the 1980s. The sharp spike comes as escalating tensions in the Middle East threaten global energy supply.

Strait of Hormuz Disruption Chokes Oil Supply

The latest rally followed air strikes by the United States and Israel on Iran on Feb. 28, which killed Iran’s Supreme Leader Ali Khamenei and triggered widespread retaliation from the Iranian regime. The conflict has since escalated across the region.

A critical factor driving oil higher is the near halt of tanker traffic through the Strait of Hormuz, one of the world’s most vital energy chokepoints. Roughly 20 million barrels of oil per day –about one-fifth of global seaborne crude supply – normally passes through the waterway connecting the Persian Gulf to international markets.

Data from Vortexa indicates that around 16 million barrels per day are currently stranded behind the strait and unable to reach global markets, as mentioned on Yahoo Finance.

Analysts warn the disruption could send prices even higher. Macquarie strategist Vikas Dwivedi wrote in a client note that even a few weeks of closure could create a chain reaction that might push crude prices toward $150 per barrel or higher, as quoted on the same Yahoo Finance article.

Conflict Expands Across the Middle East

Several major energy sites have already been impacted. Bahrain’s Bapco Energies refinery has been attacked. Saudi Arabia’s Ras Tanura refinery has been taken offline. Qatar’s Ras Laffan LNG complex has declared force majeure. In addition, oil tankers in the Persian Gulf have been struck by missiles and drones.

Inflation and Growth Risks Mount

Economists warn that sustained high oil prices could ripple through the global economy. In a recent client note, Goldman Sachs estimated that if oil prices temporarily rise to $100 per barrel, global headline inflation could increase by 0.7 percentage points, while global economic growth could decline by about 0.4 percentage points, as quoted on Yahoo Finance.

ETF Strategies to Play

Against this backdrop, below we highlight a few ETF strategies that could be played now.                          

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.

Some companies offer outsized payouts or sizable yields on a regular basis, while some companies maintain a track record of paying dividends regularly.  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 – a dividend aristocrat – lost only 0.9% on Mar. 6, 2026 while Vanguard High Dividend Yield Index Fund ETF VYM – a high-dividend ETF – too lost 0.9%. This compared a 1.3% slide in State Street SPDR S&P 500 ETF Trust SPY on the day.

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.

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.

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.

Bet on Commodities

Commodities – especially oil, gold, natural gas, and agricultural products – often rise during wars due to a mix of supply shocks, and risk hedging. Moreover, the current oil price-induced inflationary environment is good for commodity ETF investing as the segment fares better in an inflationary environment. Invesco DB Base Metals Fund DBB added about 1.7% on Mar. 6, 2026. Invesco DB Commodity Index Tracking Fund DBC advanced about 3.7% on mar. 6, 2026.

Time for Inflation-Beating ETFs?

With inflation expected to rise amid the oil-induced turmoil, inflation-beating products should be in favor. VanEck Real Assets ETF RAAX added 0.7% on Mar. 6, 2026. The ETF RAXX allocates funds to exchange-traded products that provide exposure to real assets including resource assets: commodities, natural resource equities; income assets: REITs, Infrastructure, MLPs; and gold, which includes gold mining equities.

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This article originally published on Zacks Investment Research (zacks.com).

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