Global financial markets remain in focus this week after the US launched airstrikes on three Iranian nuclear facilities over the weekend, to which Tehran retaliated with an attack on the US bases in Qatar.
US military action, aimed at curbing Tehran’s nuclear ambitions, has stoked fears of much broader conflict in the Middle East, especially since President Trump announced a ceasefire afterwards, which both Israel and Iran reportedly violated on Tuesday.
Amidst the aforementioned geopolitical escalation, a deeper trend is unfolding that points to a major shift in investor strategy: the rise of international stocks.
Geopolitical tensions, combined with doubts over the USD’s long-term resilience and evolving global trade dynamics, are pushing investors to look outside the world’s largest economy for lucrative returns.
Fund managers are increasingly turning to international stocks
Global investors are increasingly convinced that international stocks are a better bet than their US counterparts for the next five years, as per the Bank of America’s latest fund manager survey.
“Less than one quarter think US assets will continue to dominate ranked returns, and just 5.0% anticipate bonds to perform best,” wrote Michael Hartnett, the bank’s chief investment strategist, in his latest report.
This marks a meaningful shift in sentiment among large institutional investors who had, until fairly recently, remained largely overweight US tech giants.
Note that “ACWX” or the iShares MSCI All-Country World Index (excluding US) ETF is currently up some 15% for the year, significantly better than 2the .6% gain the S&P 500 index has been able to achieve in 2025.
More importantly, this year’s performance marks the fund’s strongest relative to the benchmark index since its inception in 2008, indicating investors are super bullish on international stocks for the back half of 2025.
Part of the reason why global investors are increasingly picking international stocks over US ones is the move away from the greenback.
USD positioning has fallen to levels not seen in more than two decades, as investors reassess the currency’s safe-haven appeal in the wake of President Donald Trump’s aggressive trade stance and the re-emergence of geopolitical risks in the Middle East.
Israel-Iran conflict is boosting interest in international stocks
The attack on Iran has further strained already fragile relations in the Middle East.
Israel, a close U.S. ally and longtime adversary of Iran, is likely to be drawn deeper into the crisis, raising the stakes for the region and, by extension, global markets.
Energy prices are already edging higher on supply concerns, though investors appear to be hedging elsewhere.
Gold, long the go-to asset in times of crisis, is seeing renewed interest. Hartnett notes that “’long gold’ is the most crowded trade for the third month running,” according to 41% of fund managers surveyed.
That dethrones the “Magnificent 7” U.S. tech trade, which had dominated investor portfolios for over two years.
At the same time, emerging markets are coming back into favor. In June, investors increased allocations to Eurozone stocks, emerging markets, and financials, while reducing exposure to U.S. equities, the dollar, and energy.
These changes indicate a growing appetite for diversification amid geopolitical uncertainty.
While the long-term impact of the US-Iran confrontation remains unclear, the market’s near-term response is increasingly decisive: in a world rocked by conflict and uncertainty, international equities are being hailed as the best opportunity for the next five years.
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