European ETF flows ran out of road in March, as the Iran war pared back market gains from the first two months of the year and investors returned to the sidelines. The European exchange-traded fund (ETF) and exchange-traded commodities (ETC) market saw a sharp decline in investment during March, gathering
Maisie Grice
Thursday 09 April 2026 2:24 pm
European ETF flows ran out of road in March, as the Iran war pared back market gains from the first two months of the year and investors returned to the sidelines.
The European exchange-traded fund (ETF) and exchange-traded commodities (ETC) market saw a sharp decline in investment during March, gathering only €9.4bn (£8.1bn), according to the latest data from Morningstar.
In contrast, the market attracted as much as €45.4bn in February and €46.8bn in January, as investors became increasingly spooked by the impact of the Middle Eastern conflict during March, leading them to retreat from the market.
Equity ETFs also experienced a downturn, attracting just €8.8bn of flows during the third month of the year, a drop of as much as 77 per cent from the €39.7bn attracted in February.
But despite the sharp drop in flows over March, the conflict failed to stop flows in the first quarter reaching record highs of €101.7bn, as early gains managed to offset the “worrisome end to the period”.
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Assets under management in ETFs and ETCs also tumbled, amounting to €2.8 trillion in March, down from €2.9 trillion the prior month, with the decline credited to capital losses across both global equity and fixed-income markets.
Energy ETFs surge
While equity ETFs felt the impact of the conflict, energy ETFs saw a surge in inflows, as investors raced to capitalise on soaring oil and gas prices.
The sector attracted €1.7bn inflows in March, as despite gathering traction at the start of the year, the conflict led to a sharp increase, as investors expected that supply restrictions would hike prices even higher.
Read more FTSE 100 suffers worst month since Covid as Iran war rages on
Brent crude reached $119 a barrel at its highest during March, driven by the intense market volatility the war created.
In contrast, financial services equity ETFs plummeted, recording outflows of €3.7bn, as investors become afraid of a potential global recession driven by the risk of stagflation.
Despite the drive in demand for energy ETFs, investors still preferred to retreat to cash and “prioritised liquidity and flexibility over making large directional bets”.
Jose Garcia-Zarate, senior principal at Morningstar, said: “After two very strong months, March marked a clear shift in investor behaviour. As geopolitical tensions in the Middle East intensified and market volatility increased, investors became more cautious, pulling back from broad equity and fixed-income exposure.
“We saw selective interest in areas such as energy, but overall, investors sat firmly on the sidelines.”
Recession fears drive bond flows
Recession anxiety also impacted bond ETFs with the sector reporting €2.4bn of outflows in March, reversing the inflows of €5.2bn in February.
Outflows of this scale had not been seen since 2022, when the Russia-Ukraine war broke out, with the Middle Eastern conflict having a similar effect.
In particular, recession and inflation concerns weighed on emerging market debt ETFs, which for the past year, had been riding the wave of being a popular diversifier from US dollar exposure, following a similar trend to EM markets with investors looking to pull away from tech-heavy US markets.
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