-ETF market absorbs Iran shock and posts strong inflows again
- AI optimism outweighs geopolitical concerns for US ETFs
- Cautious reallocation in bond ETFs The European UCITS ETF market* regained clear momentum in April, halting the sell-off triggered by the Iran conflict. With net inflows of USD 45.8 billion, the ETF market grew above its short- and medium-term averages.

“Risk aversion in the market is declining,” says Max Dawe, Director, ETF Strategist at Fidelity International. “The market is trying to block out the Iran issue as much as possible and has recently focused strongly on the US earnings season and Artificial Intelligence (AI) rotation. The US market in particular is benefiting from this,” Dawe adds.

However, the macro picture remains divided. The energy and supply shock caused by ongoing disruptions around the Strait of Hormuz continues to weigh on Europe. Prices, inflation and growth expectations are being negatively affected. “Europe is more strongly impacted by the conflict due to its higher dependence on energy imports. Accordingly, momentum in European equity focused ETFs has weakened over the past two months,” says Dawe.

Bonds: Government bonds gain momentum – high yield stabilises

With inflows of USD 10 billion, bond ETFs performed significantly better in April than in the previous month. Investors showed a stronger preference for quality, with above‑average purchases of government bond ETFs.

“Overall, movements in bond ETFs point to a recalibration of investor portfolios: government bonds are once again in demand as a stabilising anchor, while investors remain selective when it comes to credit risk. The fact that high yield turned slightly positive again in April shows that risk appetite is returning – just not across the board,” says Dawe.

* Throughout the comment, "ETFs" always refer to UCITS ETFs