Traders Resist Defensive Stocks’ Haven Status Amid Mideast Risk

June 20, 2025 – Despite escalating geopolitical tensions in the Middle East, traders are showing reluctance to shift heavily into traditional defensive stocks such as utilities, consumer staples, and healthcare — sectors typically favored during periods of uncertainty. Historically viewed as safe havens during market volatility, these defensive sectors have underperformed in recent sessions, even as broader markets react to rising risks tied to the Israel-Iran conflict and potential U.S. involvement. Analysts suggest this hesitancy may be driven by concerns over high valuations, limited upside potential, and shifting macroeconomic expectations, including interest rate trajectories and inflation resilience. “While defensive stocks tend to provide stability in times of turmoil, investors appear to be favoring cash, commodities, and selective tech over a broad defensive rotation,” said one market strategist. This shift reflects a more nuanced risk posture, with investors weighing short-term geopolitical shocks against longer-term structural trends. Some traders are also positioning for volatility spikes in energy and currency markets rather than taking shelter in traditional equity havens. The muted reaction in defensive sectors underscores a broader market complexity in 2025, where historical playbooks are being reassessed amid evolving geopolitical, fiscal, and monetary landscapes.

MARKETS