When the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced sanctions on Rosneft and Lukoil last week, the ripple effects were immediate. Within a matter of hours, 91 ETFs holding a combined $280bn in assets were recalculating portfolios, screening exposures and updating investors. The largest affected fund, the iShares Core MSCI Emerging Markets ETF (IEMG), alone manages $112bn across 2,683 securities – part of a complex set of portfolios containing anywhere from 92 to more than 4,000 holdings.
From emerging-markets and ACWI global strategies to natural-resources funds, the impact spread across the ETF spectrum. Among the top five by size, IXUS ($50.5bn), ACWI ($23.1bn), EEM ($20.6bn) and SPEM ($14.5bn) all faced rapid recalculation and compliance cycles. Far from being a one-off, this level of sanctions-induced volatility has become a recurring operational theme. Each new round tests how well financial infrastructure can respond under pressure. In today’s ETF markets, these changes cascade through a tight 48-hour response window. Firstly, index providers must remove sanctioned constituents, before the ETF providers then swiftly step in to update their baskets and valuations.
For firms operating on fragmented or legacy systems, those two days can feel like an eternity. Recalculation cycles of eight to twelve hours open up compliance and reputational risk. Integrated data and automation, by contrast, reduce that exposure to one to two hours, ensuring pricing accuracy and regulatory confidence when it matters most.
Recent analysis of securities and fund exposures reveals just how deeply intertwined the financial system remains with sanctioned entities. More than 150 entities have been identified as linked to Lukoil or Rosneft, spanning over 400 equity securities and debt instruments – along with thousands of structured products, options, and futures. In the collective fund universe, more than 185,000 funds and ETFs, including all SEC-approved funds, have been scanned for sanctions exposure, uncovering links between approximately 6,500 funds and these two Russian energy giants.
A new trend is also emerging. Many ETFs now hold sanctioned securities that have been marked to zero. Over time, however, some of these assets may regain value as sanctions are lifted or reversed. This potential increase in value could materially influence future net asset values (NAVs). Market participants, including asset managers and hedge funds, are already modelling the possible recovery of these positions, viewing sanctions less as permanent exclusions and more as deferred investment opportunities.
The timeline for managing such exposures has also been shaped by regulatory developments. OFAC’s General License 127, for instance, authorizes US persons to divest or transfer debt or equity issued or guaranteed by blocked entities to non-US persons until 12:01am (EST), 21 November 2025. This deadline has effectively created a sanctions countdown clock for global investors racing to unwind or reallocate positions in time.
At the same time, the application of sanctions is growing increasingly complex. Mergers, acquisitions and restructurings involving sanctioned firms raise new ambiguities. A prime example being whether a newly merged entity remains sanctioned or not. Offshore financing vehicles such as Bermudan subsidiaries may occupy grey zones. In other words, while they may not be directly listed, they could be reputationally damaged through association. If this wasn’t enough, instruments like American Depositary Receipts (ADRs) further complicate exposure mapping.
Investing in an environment riddled with such nuance puts an even greater emphasis on having granular data. Understanding a company’s ownership hierarchy, subsidiary structure and identifiers such as LEIs and ISINs is now central to effectively managing risk. Comprehensive sanctions intelligence, capable of mapping parent-subsidiary relationships, associated entities, and financial instruments in near real time, has become critical to identifying which securities are sanctioned, indirectly linked, or unaffected. The result is the ability to act decisively within that all-important 48-hour window.
Whether it’s greater tightening, reversing, or reshaping exposure patterns in ways that challenge traditional models, sanctions will continue to evolve. For ETF providers and investment managers, resilience now depends on connected data, transparent hierarchies and automated decision flows that can adapt as fast as sanctions. And in a world where sanctions have never moved faster, data must keep up. One thing is for sure, the next 48-hour challenge will come: it is just a question of who will be best prepared before it arrives.
