3 Defensive ETFs Worth Buying as March 2026 Volatility Continues

Volatility has become the norm in recent years, and 2026 looks to be no different. Concerns about artificial intelligence (AI), private credit, a weakening labor market, and the conflict in Iran have made the market treacherous.

While it's hard to know what will happen with the various conflicts in the Middle East, it's clear that concerns about AI's effect, along with broader economic concerns, are likely to linger for some time.

Long-term investors with a five-year or longer horizon typically don't need to take any action in their portfolios. As history has shown, the longer one holds stocks, the less likely they are to lose money.

Image source: Getty Images.

However, not everyone has the luxury of being a long-term investor. In some cases, investors may worry that their core portfolio holdings are either too aggressive or have seen a fundamental shift that could affect the long-term thesis.

For this group, it may make sense to adopt a more defensive stance right now. Here are three exchange-traded funds (ETFs) worth buying as March volatility rolls on.

Several ways to be defensive

I think there are a few ways investors can position their portfolios defensively right now. One concerns the conflict in Iran. The primary investment-related issue around the conflict is that it threatens safe passage for tankers through the Strait of Hormuz. This is a key route through which one-fifth of the world's oil passes every day, at least under normal circumstances.

But with Iran restricting the passage of some ships and many others concerned about getting through safely, oil prices have recently skyrocketed above $100 per barrel several times this month. This is why investors should consider owning the Vanguard Energy ETF (NYSEMKT: VDE), which holds a number of large U.S. energy stocks. VDE will be a good hedge if the conflict in Iran is prolonged.

Even if the conflict is short-lived, I still think exposure to oil and energy is a good long-term play. The demand for power is expected to be intense in the coming years, and oil is a finite resource.

Another good defensive ETF to buy is the iShares MSCI USA Min Vol Factor ETF (NYSEMKT: USMV), which tracks U.S. stocks with lower volatility than the broader market. The ETF holds a basket of large U.S. stocks across sectors that, together, are designed to have lower volatility than the major indexes.

The ETF is up about 2% this year and just slightly down over the past month. Investors still get exposure to stocks, but can feel better about protecting their downside.

Finally, investors may want to prepare for a potential recession. While this has been a concern for a while, recent economic data suggest that the labor market may be weakening and that broader economic growth may be slowing.

A good group of stocks to own in a recession is consumer staples, which are essentials that consumers prioritize in their budgets. Examples of these items are cosmetics, household essentials, and food and drink. One ETF that provides exposure to consumer staples is the State Street® Consumer Staples Select Sector SPDR® ETF (NYSEMKT: XLF).

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.