Israel-Iran Conflict Pushes Shipping, Defense ETFs Higher
- Shipping funds BWET and BDRY jump on the potential for higher rates.
- Defense ETFs ITA and EUAD advance amid wider market selloff.
- Israel-focused ETFs such as EIS tumble after Iranian nuclear installations bombed; USO rallies.
Shipping ETFs jumped and Israeli funds slipped after Israel’s attack on Iran’s nuclear-enrichment facilities and other sites sparked concerns about the region’s stability and ocean transit costs surged.
The Breakwave Tanker Shipping ETF (BWET), which tracks futures contracts in the crude-oil-shipping market, jumped 11%. The Breakwave Dry Bulk Shipping ETF (BDRY), which provides exposure to ocean transit of dry-bulk transport for products like iron ore, coal and grain, jumped 1.2%.
Shipping rates surged on worries that fighting in the Middle East would create havoc in the Strait of Hormuz, a globally critical oil transit route, causing ships to reroute and take longer journeys. Very large crude carrier rates for Middle East to Asia routes jumped 40% this morning as ships planned routes that avoided Iranian waters, according to FXEmpire.
USO, ITA Follow Crude Oil Higher
Crude oil prices jumped, pushing the United States Oil Fund LP (USO) up 5.8%, while defense ETFs like the iShares U.S. Aerospace & Defense ETF (ITA) and Select STOXX Europe Aerospace & Defense ETF (EUAD) advanced. Broad-market ETFs like the Vanguard S&P 500 ETF (VOO) and SPDR Dow Jones Industrial Average ETF Trust (DIA) slipped.
“Historically, we have seen that political instability in the Middle East that potentially impacts energy supply or transportation can cause ETFs like BWET to react,” said Aniket Ullal, head of ETF research & analytics at CFRA. BWET jumped 21% between October 2023 and April 2024 when the Houthi rebels in Yemen began attacking ships in the Red Sea, he said.
“Investors may be concerned that Israel's recent preemptive strike on Iran may impact energy markets and transportation through the Red Sea, especially if nonstate actors like the Houthis are drawn into the conflict,” he explained.
Israel-focused ETFs fell after the attack, which Israel launched after Iran threatened to increase its nuclear-enrichment program. The ongoing attacks killed high-ranking military officials, including Gen. Hossein Salami, head of the Iranian Revolutionary Guard.
Israel-focused ETFs—Source: FactSet
The iShares MSCI Israel ETF (EIS) lost 1.2%, while the ARK Israel Innovative Technology ETF (IZRL) fell 1.1%.
