Heightened conflict in the Middle East is adding another layer of uncertainty to global markets, and one Wall Street team thinks biopharma could be one of the places investors look for shelter.
In a recent note, Truist Securities argued that commercial-stage biopharma has historically held up better than the broader market during periods of geopolitical stress. The firm reviewed several market shocks from the last few years, including the war in Ukraine and earlier bouts of Middle East-driven turbulence, and found that healthcare-focused names have generally been less volatile than the S&P 500.
Within the sector, the healthcare and pharma-heavy XLV ETF has tended to show steadier performance than the more speculative biotech basket represented by XBI. That split matters: larger, revenue-generating companies often attract defensive capital during risk-off periods, while smaller biotech firms can become more volatile and, for some investors, more attractive on pullbacks.
Truist said the recent backdrop suggests investors are not pricing in the same degree of downside risk they were at the height of earlier geopolitical scares. The implication is that both large-cap pharma and select biotech names may benefit from a rotation into sectors seen as less tied to the economic cycle.
For large pharmaceutical companies, direct exposure to Middle East demand appears limited. Truist estimated that most major players derive only a modest share of sales from the region, with GSK and Takeda among the highest at roughly 6%. Even so, their broader U.S. and European businesses should help cushion any regional disruption.
The analysts also pointed to a few names that could see indirect benefits if tensions persist. Amgen, for example, produces products included in government stockpiles for radiological or nuclear emergencies, while Gilead and Regeneron have procurement eligibility and manufacturing ties with the government.
For investors, the takeaway is simple: when uncertainty rises, biopharma can move from growth story to defensive trade. And in the biotech segment, that can create opportunity for those willing to tolerate a longer runway and more price swings.
