ETF Spotlight: XLE Rises as Tensions Mount in Middle East
The fund focused on oil, gas, and other energy stocks has risen as tensions in the Middle East escalate.
The $35 billion by assets Energy Select Sector SPDR Fund (XLE) popped roughly 1.5% in Thursday trading, adding to gains from the past five days amid escalating Middle East tensions that have lifted oil prices.
XLE is up about 7% since last Friday when Israel assassinated Hassan Nasrallah, the charismatic leader of the militant group Hezbollah, widely considered a proxy for Iranian regional goals. Iran retaliated earlier this week, firing a barrage of missiles toward Israel, raising concerns that the two countries may be headed for a war that would disrupt oil supply routes.
Energy ETFs Rise With Middle East Tension
Other energy-focused exchange-traded funds have risen similarly with the Fidelity MSCI Energy Index ETF (FENY) and Vanguard Energy ETF (VDE) both rising about 1.8% on Thursday.
Brent and West Texas Intermediate crude oils, widely watched measures of energy markets, were both up more than 4% in Thursday afternoon trading and have gained about 8% over the past week to reach their highest levels since late August. Oil markets dipped over the summer and have been fairly tame over the past month.
XLE's Largest Holdings
XLE, which debuted in 1998, tracks an index of mainly U.S. companies covering the oil, gas, consumer fuels, and energy equipment and services industries. Oil giants Exxon Mobil Corp. and Chevron Corp. comprise the ETF's largest holdings with 23% and 15.5% allocations, respectively. ConocoPhillips represents almost 8% of the portfolio. The fund, which has a .09% expense ratio, caps individual equities so that no single one exceeds 25% at each quarterly rebalance.
Exxon Mobil climbed the better part of a percentage point on Thursday and has risen about 7.5% over the past five days. Chevron has jumped more than 6% over the same period.
etf.com Research Lead Kent Thune noted that investors remain wary about the potential impact of a major Israel-Iran conflict.
"Unless and until Iranian assets, such as nuclear sites and oil fields, are struck by Israel, or the Strait of Hormuz is choked, the runup in oil prices is fear-based speculation," Thune wrote. "Investors have bid up oil prices on these worst-case scenarios."
