With hopes that the war with Iran is ending, markets are responding decisively. Oil prices are dropping, volatility is trending lower, and risk appetite is returning. If this trend holds, it creates a very different investing backdrop than what we’ve seen for much of the past year.

And, according to President Trump, the conflict could be nearing its end within weeks, which only reinforces the case for a continued decline in market volatility.

“We have had regime change. Now, regime change was not one of the things I had as a goal. I had one goal: they will have no nuclear weapon, and that goal has been attained. They will not have nuclear weapons. But we’re finishing the job, and I think within maybe two weeks, maybe a couple of days longer, to do the job. But we want to knock out every single they have,” Trump said from the Oval Office, as quoted by CNN.

If that happens, investors may want to shift from defensive positioning toward strategies that benefit from cooling volatility and steadier equity trends.

Inverse VIX ETFs Offer Direct Exposure to Falling Volatility

One of the most direct ways to trade cooling volatility is through inverse VIX ETFs. These are tactical tools, not long-term holds, but they can be highly effective in the right environment.

ProShares Short VIX Short-Term Futures ETF (SVXY)

The ProShares Short VIX Short-Term Futures ETF (BATS: SVXY) seeks to deliver -0.5x the daily performance of the S&P 500 VIX Short-Term Futures Index. In simple terms, it rises as volatility falls.

Opportunity:
If volatility continues to normalize from elevated levels, SVXY can benefit from both declining fear and the natural contango in VIX futures. However, this is best used for short-term trades due to compounding effects and volatility spikes.

-1x Short VIX Futures ETF (SVIX)

The -1x Short VIX Futures ETF (BATS: SVIX) provides full inverse exposure to short-term VIX futures. That makes it more aggressive than SVXY.

Opportunity:
For traders with a strong conviction that volatility will continue to fall, SVIX offers greater upside potential—but also higher risk. Even a short-term volatility spike can lead to sharp drawdowns, so timing and risk management are critical.

Broad Market ETFs Benefit From Stability

In times of cooling volatility, capital typically rotates back into broad equities. That makes low-cost index ETFs particularly attractive. That means investors may also do well with Warren Buffett-mentioned or related ETFs, such as the Vanguard S&P 500 ETF (NYSEARCA: VOO).

Warren Buffett has long advocated for low-cost index funds, specifically pointing to the S&P 500 as a core long-term investment.

Opportunity:
A falling volatility environment often supports higher equity valuations. With mega-cap tech still driving earnings growth and broader participation improving, VOO offers exposure to both stability and upside. Its ultra-low 0.03% expense ratio makes it an efficient core holding.

“Wide Moat” Stocks Add Defensive Growth

Even in calmer markets, quality still matters. Companies with durable competitive advantages tend to outperform over time, especially when uncertainty fades but doesn’t disappear entirely. That can lead you to the VanEck Morningstar Wide Moat ETF (BATS: MOAT)

This ETF focuses on companies with sustainable competitive advantages—businesses that can protect margins and compound earnings.

Opportunity:
MOAT can outperform in a “normalized” market where investors reward consistent earnings and pricing power. With holdings like Alphabet (NASDAQ: GOOGL) and NXP Semiconductors (NASDAQ: NXPI), it also provides a balanced mix of growth and value.

Income + Stability With Buffett-Inspired Exposure

For investors looking to balance income and stability, Berkshire Hathaway-inspired strategies can be compelling. That brings us to the VistaShares Target 15 Berkshire Select income ETF (NYSEARCA: OMAH).

OMAH mirrors many of Berkshire Hathaway’s top holdings while adding an income component through a structured strategy.

Opportunity:
This ETF is particularly attractive in a cooling volatility environment because it combines blue-chip stability with monthly income. That can be appealing if markets grind higher rather than surge.

Positioning for a Lower Volatility Market

A cooling volatility environment doesn’t mean opportunity disappears—it simply shifts. Instead of chasing defensive trades, investors can look toward strategies that benefit from stability, including inverse VIX ETFs for tactical exposure and broad-market or quality-focused ETFs for longer-term positioning.

The key is balance. Inverse volatility ETFs like SVXY and SVIX can capture short-term moves, while funds like VOO, MOAT, and OMAH provide more durable exposure to a steadily improving market. If volatility continues to decline alongside easing geopolitical risk, this combination can help investors participate in upside while managing risk effectively.

For one, the conflict appears to be widening. Drones hit the U.S. embassy in Riyadh. The State Department ordered evacuations at facilities in Bahrain, Iraq, and Jordan. Hezbollah attacked Tel Aviv. And there are concerns about how long Gulf states can keep themselves safe from Iranian attacks. Plus, President Trump just said the conflict could continue for another four weeks, which raises uncertainty, which markets hate.

In addition, “Market anxiety ratcheted higher overnight amid concerns that a decapitated and leaderless Iranian government and military will execute a prolonged retaliatory response aimed at sowing chaos throughout the region by targeting key economic and energy infrastructure for weeks to come,” said Adam Crisafulli of Vital Knowledge, as quoted by CNBC. 

Until there’s clarity, markets could slip even more.  Except for oil, which could easily gush higher.

Eventually, the Situation Will Cool Off

This too will pass. It’s easy for investors to say, but harder to internalize in volatile markets. However, right now, even though tensions are sky-high, the VIX is telling us that fear is too hot. And when the temperature goes down in the Middle East, we’ll be offered an opportunity on the short side of volatility.

In fact, if you look at the VIX dating back to early 2022, you can see that with every spike, RSI, MACD and Williams’ %R tell us when the VIX is likely to pivot lower. We saw that happen in April 2025, December 2024, August 2024, April 2024, October 2023, March 2023, October 2022, September 2022, and also in May 2022.  Each time the VIX peaked with those three indicators, buying calls on the DIAs, QQQs and the SPY typically paid off well.

One of the best ways to trade an overheated fear gauge is by jumping into inverse VIX ETFs, which move higher when the VIX moves lower.

Take Advantage of Volatility With These ETFs

Here are two of the top ETFs to consider when the VIX moves lower:

The ProShares Short VIX Short-Term Futures ETF (BATS: SVXY) seeks daily investment results, before fees and expenses, that correspond to one-half the inverse (-0.5x) of the daily performance of the S&P 500 VIX Short-Term Futures Index, as noted by ProShares.com.

Specifically, the fund tends to profit from decreases in the expected volatility of the S&P 500, as measured by the prices of VIX futures contracts. The S&P 500 VIX Short-Term Futures Index has historically been less volatile than the VIX but significantly more volatile than the S&P 500. The fund has an expense ratio of 0.95%.

Another option is the -1x Short VIX Futures ETF (BATS: SVIX), which is an inverse VIX-linked ETF that seeks to provide daily investment results, before fees and expenses, that correspond generally to the Short VIX Futures Index, as noted by VolatilityShares.com.

Simply put, as the VIX drops, the SVIX ETF rises. The inverse is also true. That’s why the SVIX is down 13.4% in the 30 days ending March 3.

Make Volatility Your Friend

Right now, the headlines are full of doom and gloom. Geopolitical tensions are rising with uncertainty, oil is reacting by gushing higher on fear of what’s happening in the Strait of Hormuz, and the VIX is elevated. That combination naturally makes investors uneasy.

But seasoned investors know something important: volatility is emotional. It spikes when uncertainty rises — and it falls when clarity returns. It doesn’t stay elevated forever.

When volatility stops rising on bad news, that’s often the first sign that panic is burning out.

If the VIX begins to roll over, history suggests markets may stabilize and potentially rebound. 

That’s when some of the greatest opportunities tend to appear — not when fear is building, but when it starts to fade. For now, patience matters. Let the fear spike. Let the technical signals develop. And be ready to act when conditions begin to normalize. 

As Warren Buffett has said, “A climate of fear is your friend when investing; a euphoric world is your enemy.”  Or, as we learned from Baron Rothschild, “Buy when there’s blood in the streets, even if the blood is your own.” His family is now worth $400 billion because of that, by the way.