Energy Funds Rally in Europe on Israel-Hamas War

Energy Funds Rally in Europe on Israel-Hamas War

Defensive stocks jump as investors turn cautious

Reviewed by: Staff
Edited by: Mark Nacinovich

Energy exchange-traded commodities spiked in Europe on Monday after the war between Israel and Hamas led to a surge in oil prices.

The world’s largest oil ETC, the $2.1 billion WisdomTree Brent Crude Oil ETC (BRNT), rose by 3.8% as trading opened on Monday after the oil price jumped above $87 a barrel following Hamas’ surprise attack on Israel on Saturday.

Energy-sector exchange-traded funds also jumped on the news, with iShares MSCI World Energy Sector UCITS ETF (WENS) and the Xtrackers MSCI USA Energy UCITS ETF (XSEN) up 3.3% and 2.8%, respectively.

Elsewhere, the WisdomTree Energy ETC (AIGE) spiked by 3.4% as concerns the conflict could spread to other parts of the Middle East drove prices higher.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said a long war could bring Iran into the conflict, creating another supply shock within the energy sector.

“This latest jump will fuel inflationary worries, at a time when investors are already jittery about the interest rates potentially staying higher for longer," she said.

Energy ETFs as "Safe Haven"

Norman Villamin, group chief strategist at Union Bancaire Privée, added the energy sector could act as a “safe haven” for investors as uncertainty in the region increases.

“With energy equities historically cheap on an absolute basis and relative to the broader market, the sector may offer a safe haven amidst the geopolitical uncertainty introduced over the weekend,” he said.

Other defensive sectors have also been performing strongly on the news, with gold jumping almost 2% since Friday, boosting gold ETCs such as the $13.4b billion Invesco Physical Gold ETC (SGLD) and the $12.5 billion iShares Physical Gold ETC (SGLN).

Theo Andrew joined ETF Stream as a senior reporter in September 2021. He has over four years of investment writing experience spanning pensions and retail investments, most recently at Citywire, where he was a senior reporter covering environmental, social and governance investing.