Energy ETF Spotlight: Three Top Ways Investors are Trading Iran Tensions

With tensions boiling, Iran has said it was willing to meet with the U.S.

“If the U.S. will lift crippling sanctions, and returns to the 2015 nuclear deal, Iran is ready to meet,” according to President Hassan Roubini, as quoted by Reuters in July 2019. “We have always believed in talks. If they lift sanctions, end the imposed economic pressure and return to the deal, we are ready to hold talks with America today, right now, and anywhere.”

That followed President Trump’s threat to “substantially” increase sanctions on Iran.

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“Iran has long been secretly ‘enriching,’ in total violation of the terrible 150 Billion Dollar deal made by John Kerry and the Obama Administration,” Trump tweeted. “Remember, that deal was to expire in a short number of years. Sanctions will soon be increased, substantially!”

Is Iran Really Ready to Cool Tensions?

However, it didn’t appear Iran was ready to deescalate the situation after seizing a British tanker in the Persian Gulf. That’s after Iran was already implicated in six other attacks on oil tankers in the Strait of Hormuz. That also raises concerns Iran could move to block the strait altogether, blocking about a fifth of the world’s oil, and nearly a quarter of natural gas supply.

Making things worse, the  International Atomic Energy Agency (IAEA) inspectors confirmed Iran had enriched uranium to 4.5% fissile purity, which is above the 3.67% limit set by the deal. This is now Iran’s second breach of the deal.   

Iran has also said it will continue to breach the deal’s caps by one until it receives the “economic windfall – trade and investment deals with the wider world – promised under terms of the agreement,” as also noted by Reuters.

All of that is creating the perfect storm for higher oil prices.

As a result, investors are already pushing into oil stocks and ETFs, including the following:

SPDR Energy Select Sector ETF (XLE) seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Energy Select Sector Index. It also seeks to provide precise exposure to companies in the oil, gas and consumable fuel, energy equipment and services industries.

iShares U.S. Aerospace & Defense ETF (ITA) invests in stocks in the domestic aerospace and defense sector. These stocks can include companies that manufacture both commercial and military aircraft as well as other types of defense-related equipment. It has holdings in Boeing, United Technologies Corporation, Lockheed Martin, Raytheon, General Dynamics, and Northrop Grumman for example.

Power Shares DB Oil ETF (DBO), which provides exposure to light sweet crude (WTI). The Fund is designed for investors who want a cost-effective and convenient way to invest in commodity futures. The Index is a rules-based index composed of futures contracts on light sweet crude oil (WTI). 

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