Investors scored on Iran war's oil market boom. Staying long the trade will get trickier
The past week's earnings from the energy sector demonstrated just how much the U.S.-Iran war has contributed to the short-term performance of major...
Key points
- The past week's earnings from the energy sector demonstrated just how much the U.S.-Iran war has contributed to the short-term performance of major players in the oil market — and to the portfolio gains of investors who targeted stock opportunities in the sector.
- An energy market driven by geopolitics — not only the war in the Middle East but also between Russian and Ukraine — has attracted money into oil and oil industry-related ETFs, and it has created big winners along the way.
- Among the big winners have been crude oil futures ETFs such as the United States Oil Fund (USO), Invesco DB Oil Fund (DBO), and United States Brent Oil Fund (BNO).
- At a broader level of exposure, winning trades include the energy sector index fund, State Street Energy Select Sector SPDR ETF (XLE), as well as crude oil refining trades, such as the VanEck Oil Refiners ETF (CRAK).
What happened
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The past week's earnings from the energy sector demonstrated just how much the U.S.-Iran war has contributed to the short-term performance of major players in the oil market — and to the portfolio gains of investors who targeted stock opportunities in the sector. An energy market driven by geopolitics — not only the war in the Middle East but also between Russian and Ukraine — has attracted money into oil and oil industry-related ETFs, and it has created big winners along the way. Among the big winners have been crude oil futures ETFs such as the United States Oil Fund (USO), Invesco DB Oil Fund (DBO), and United States Brent Oil Fund (BNO). At a broader level of exposure, winning trades include the energy sector index fund, State Street Energy Select Sector SPDR ETF (XLE), as well as crude oil refining trades, such as the VanEck Oil Refiners ETF (CRAK). "Short-term traders prefer ETFs like DBO since futures prices track more closely to spot oil prices than equities and are therefore more volatile than stock-based ETFs," said Aniket Ullal, head of ETF research & analytics for CFRA. Nadig pointed to uranium and related nuclear energy ETFs, which he said attracted $5.67 billion in...