The U.S. market, which is already navigating a volatile and uncertain 2025, now faces the risk of more instability as the rising likelihood of U.S. involvement in the Iran-Israel conflict further amplifies uncertainty and market volatility.
This week, the S&P 500 Index fell about 0.8% as of Wednesday. If the United States joins the conflict in the Middle East and disruptions to the global oil supply chain intensifies, the S&P 500 Index could face further downside pressure.
According to RBC Capital Markets, as quoted on Business Insider, a direct U.S. involvement or a major disruption in global oil supply could potentially drive the S&P 500 down by as much as 20%.
The prospect of direct U.S. involvement only increases the risk of market turmoil and economic disruption, resulting in a sharp sell-off in the financial markets. The renewed conflict in the Middle East adds to existing investor concerns, as markets continue to deal with the economic fallout from President Trump’s tariff policies and their impact on global trade.
According to a Wall Street Journal report, as quoted on Reuters, President Trump approved military strike plans against Iran in a meeting with senior aides late Tuesday but held off on issuing a final order, further assessing the escalation.
Per Business Insider, the escalation in the conflict could dent both investor and business sentiment in the United States, weighing on economic activity and market confidence. According to the Conference Board’s latest survey, as quoted on Business Insider, CEO confidence fell to its lowest level in nearly three years during the second quarter.
As per RBC, citing its analysis of call transcripts, mentions of geopolitics and war are becoming prominent in recent corporate earnings calls. Disruptions in the global oil supply chain could reignite inflation in the world’s largest economy.
Below, we highlight a few funds that investors may consider to potentially capitalize on market movements if the United States gets involved in the conflict.
Increasing exposure to consumer staple funds can bring balance and stability to investors’ portfolios. Investors can put more money in consumer staples funds to safeguard themselves from the potential market downturn.
Investors can consider Consumer Staples Select Sector SPDR Fund XLP, Vanguard Consumer Staples ETF VDC and iShares U.S. Consumer Staples ETF IYK.
Amid market uncertainty, quality investing emerges as a strategic response, providing a potential buffer against the potential headwinds. This approach prioritizes identifying firms with robust fundamentals, consistent earnings and lasting competitive strengths. Investing in such high-quality companies can mitigate volatility for investors.