Oil spikes to $83, Asia crashes, energy exporters celebrate. The escalating Iran war has triggered the most dramatic country ETF reshuffling since Russia invaded Ukraine, creating clear winners and losers as global markets confront a potential energy supply shock. Asian markets bore the brunt of the sell-off, with South Korea's benchmark plunging over 11% since February 27, while energy-exporting nations like Norway gained ground as Brent crude surged to 12-month highs.

This analysis reveals which country ETFs emerged as winners and losers during the critical February 27 to March 4 period, when markets first digested the implications of sustained Middle East conflict.

The Hardest Hit: Energy Importers Lead the Declin

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Asian and European markets dominated the losing side as investors fled energy-dependent economies. The sell-off concentrated in countries with the highest energy import bills, creating a clear pattern of vulnerability.

Worst Performers (Feb 27 - Mar 4, 2026

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Bloomberg analysis identified Asian markets as bearing "the brunt of Iran war" fears, with Korea's stock market described as looking "bubbly after a 50% rally this year." Bank of America Global Research specifically flagged Thailand as having "Asia's deepest negative energy trade balance," making it particularly vulnerable to oil price surges.

The South Korea ETF (EWY) decline was especially dramatic given its year-to-date leadership position. Despite maintaining its #1 ranking among country ETFs with +38.21% YTD returns, the 11.23% weekly drop highlighted how quickly geopolitical tensions can reverse momentum in energy-sensitive markets.

The Beneficiaries: Energy Exporters and Safe Haven

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Energy-exporting nations and geographically insulated markets provided the week's only positive returns, demonstrating classic flight-to-quality behavior during crisis periods.

Top Performers (Feb 27 - Mar 4, 2026

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Norway ETF's (ENOR) resilience proved particularly noteworthy. The +0.90% gain during the crisis week helped cement Norway's position as the third-best performing country ETF year-to-date with +20.81% returns. Our detailed analysis explains how Norwegian energy giants like Equinor directly benefit from higher oil prices.

Israel ETF's (EIS) +5.94% surge reflected the country's central role in the conflict, with markets pricing in potential strategic advantages from regional realignment. Saudi Arabia and Canada's defensive performances highlighted their status as stable energy exporters outside the immediate conflict zone.

Updated 2026 Country ETF Rankings: Norway Climbs to Thir

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The Iran crisis reshuffled country ETF performance rankings, with energy exporters gaining ground while importers lost positioning.

YTD Performance Rankings (as of March 5, 2026

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Norway's climb to third position represents a significant shift in global leadership dynamics, driven by the energy sector's sudden importance in portfolio construction.

Energy Correlation Analysis: Data Reveals the Great Divid

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Correlation analysis from the past three years reveals distinct patterns between energy importers and exporters that help explain the crisis-driven performance divergence. The data shows clear clustering around energy profiles.

Energy Exporters: Higher Correlations Signal Coordinated Strengt

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Canada ETF (EWC) - The Energy Export Leader:

• Correlation with Australia (EWA): 0.83 (highest correlation)
• Correlation with European markets: Germany (0.70), Italy (0.70), Sweden (0.72)
• Correlation with commodities: Peru (0.70), Chile (0.55)

Canada's exceptionally high correlation with Australia reflects their shared commodity export profiles. Both countries benefit from energy and raw material price increases during supply disruptions.

Saudi Arabia ETF (KSA) - Regional Energy Power:

• Correlation with developed markets: Australia (0.48), Canada (0.43), Sweden (0.43)
• Correlation with energy importers: Taiwan (0.42), Germany (0.41), Poland (0.41)
• Lower correlation with crisis-hit markets: South Korea (0.37), Israel (0.37)

Saudi Arabia shows moderate correlations across markets, reflecting its role as a stable energy supplier that benefits all economies during supply shocks.

Energy Importers: High Internal Correlations Show Shared Vulnerabilit

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South Korea ETF (EWY) - Manufacturing Export Vulnerability:

• Highest correlation: Taiwan (0.71) - both tech manufacturing hubs
• European correlations: Netherlands (0.62), Germany (0.57), Sweden (0.57)
• Commodity markets: Canada (0.58), Australia (0.62)

South Korea's 0.71 correlation with Taiwan reflects their shared semiconductor manufacturing base and energy import dependency. Both markets move together during energy crises.

Israel ETF (EIS) - Geopolitical Safe Haven:

• Strong developed market ties: Netherlands (0.54), Germany (0.52)
• Energy exporter correlations: Canada (0.49), Australia (0.49), Sweden (0.48)
• Lower emerging market exposure: Shows selective correlations

Israel's correlation patterns reveal its dual nature - developed market characteristics with regional geopolitical advantages during Middle East conflicts.

Crisis Correlation Insight

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The correlation data explains why certain markets moved together during the Iran crisis:

1. Energy exporters (Canada, Saudi Arabia) maintain moderate correlations with most markets, allowing them to benefit when energy prices rise while others suffer
2. Manufacturing hubs (South Korea, Taiwan) show high mutual correlation (0.71), explaining their synchronized declines
3. Developed European markets cluster together, with Germany-Italy-Sweden showing 0.52-0.57 correlations, reflecting shared energy import vulnerabilities

These correlation patterns suggest the Iran crisis performance divergence reflects fundamental structural relationships that persist beyond short-term geopolitical events.

Valuation Analysis: Crisis Creates Opportunit

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Current market valuations reveal significant opportunities among crisis-hit markets, while energy exporters appear fairly valued despite recent gains.

Hardest Hit Markets - Valuation Recovery Potentia

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South Korea ETF (EWY): Despite the 11.23% decline, Korean equities trade at just 10.29x forward P/E, representing a massive -45.35% discount to global markets (ACWI: 18.83x). This creates potential value opportunity if crisis fears subside.

Thailand ETF (THD): Trading at 19.08x forward P/E with only a +1.33% premium to ACWI, Thailand's sell-off appears overdone relative to fundamentals.

European Markets: France (15.88x P/E, -15.67% discount), Germany (15.28x P/E, -18.85% discount), and Italy (12.56x P/E, -33.3% discount) all trade at significant discounts despite their developed market status.

Energy Exporters - Fair Value Despite Rall

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Norway ETF (ENOR): At 14.33x forward P/E with a -23.9% discount to ACWI, Norwegian stocks remain reasonably valued despite oil-driven gains.

Canada ETF (EWC): Trading at 17.65x P/E (-6.27% discount), Canadian equities reflect balanced energy exposure without excessive premium.

Saudi Arabia ETF (KSA): At 14.27x forward P/E (-24.22% discount), Saudi stocks appear undervalued given their energy export advantages.

The valuation analysis suggests that crisis-driven selling has created genuine opportunities in quality markets that were penalized purely for energy import exposure.

Investment Implications and Market Outloo

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The Iran crisis created a new investment paradigm for country ETF allocation, with energy profiles becoming the primary determinant of performance during geopolitical stress periods.

Strategic Considerations:

• Energy security now ranks equal with traditional economic fundamentals
• Geographic diversification must account for supply chain vulnerabilities
• Currency hedging becomes crucial for energy-importing economies
• Tactical allocation opportunities exist in oversold quality markets

Reuters noted that oil prices "settled at highest in over a year for second straight day as Iran crisis escalates," while Bloomberg warned that "sustained high oil prices would boost inflation and slow growth, putting central banks in a tough spot."

The persistence of these trends depends largely on conflict duration and severity. Short-term resolution could trigger sharp reversals in recent performance patterns, while prolonged tensions may embed these correlations into long-term market structure.

Conclusion: Energy Divide Reshapes Global Market

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The Iran war has fundamentally altered country ETF dynamics, creating the sharpest performance divide between energy importers and exporters since the 2022 Russia-Ukraine conflict. Asian markets bore the heaviest losses, with South Korea and Thailand leading declines despite strong year-to-date performance.

Norway's emergence as the third-best performing country ETF exemplifies how energy exporters benefit from geopolitical disruption. The +20.81% YTD return, supported by oil prices surging past $83, demonstrates the strategic value of energy self-sufficiency in an unstable world.

For investors, the crisis highlighted the importance of energy profile analysis in country ETF selection. Markets with heavy import dependencies face sustained headwinds while exporters and self-sufficient economies provide defensive characteristics during crisis periods.

Country ETF Tracker provides real-time monitoring of these dynamic relationships through our comprehensive comparison and analysis tools.

Frequently Asked Question

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Which country ETFs were hit hardest by the Iran war? South Korea ETF (EWY) led declines with -11.23%, followed by Thailand (THD) at -10.34% and South Africa (EZA) at -8.90% during February 27 to March 4. Asian markets were particularly vulnerable due to heavy energy import dependencies.

What country ETFs benefited from the Iran conflict? Israel ETF (EIS) gained +5.94%, while energy exporters Norway (ENOR +0.90%) and Saudi Arabia (KSA +0.78%) also posted gains. These countries benefit from higher oil prices and reduced regional competition.

How did the Iran war change country ETF rankings? Norway ETF (ENOR) climbed to third place with +20.81% YTD returns, while previously strong performers like Thailand and Taiwan lost ground. South Korea maintained its #1 position despite the weekly decline.

Are crisis-hit markets now attractively valued? Yes, many declined markets offer compelling valuations. South Korea trades at 10.29x P/E (-45.35% discount to ACWI), while European markets like Germany and France trade at significant discounts despite developed market quality.

Should investors avoid energy-importing country ETFs? Not necessarily. The current crisis creates tactical opportunities in quality markets that were oversold due to energy concerns. However, investors should consider energy profiles as a key risk factor during geopolitical tensions.

How long might these energy-driven correlations persist? Performance patterns will likely continue as long as Middle East tensions remain elevated and oil prices stay above $80. Short-term conflict resolution could trigger sharp reversals, while prolonged instability may embed these correlations permanently.