Global X ETFs' Malcolm Dorson suggests that despite risks associated with the ongoing war with Iran, it may be time to increase exposure to emerging markets. Dorson points to weaker dollar trends and domestic uncertainty as potential tailwinds for emerging markets, noting that a burst of U.S. war spending could soften the dollar, which had jumped earlier in the week. He acknowledges the dollar's near-term strength but does not expect it to persist, stating, 'A lot of people are trying to say this is going to be over in a week or two. We're not sure.' Dorson believes there are compelling reasons to 'buy the dip' in emerging markets at this time [1].
As of Wednesday's market close, the iShares MSCI Emerging Markets ETF (EEM) has declined more than 5% week to date, but remains up nearly 37% over the past year, indicating significant longer-term gains despite recent volatility [1].
VettaFi's Cinthia Murphy also advocates for international investments, highlighting that investors have become accustomed to geopolitical disruptions. Murphy notes that 'international has been the flavor of the year,' and points out that energy markets, particularly in Europe, could be significantly affected if the Iran conflict is prolonged due to their dependence on Middle Eastern oil. She identifies the United States Oil Fund (USO) as a potential vehicle for energy exposure, which is up 12% for the week and 32% year-to-date as of Wednesday's close [1].
Both analysts suggest that while geopolitical risks are present, there are opportunities in emerging markets and energy sectors, especially given the current market dynamics and the potential for a softer dollar if U.S. war spending increases [1].
CONCLUSION
Despite the volatility caused by the Iran conflict, analysts see opportunities in emerging markets and energy, with EEM and USO showing notable performance metrics. The market sentiment is cautiously optimistic, with a medium impact expected as investors weigh geopolitical risks against potential gains.