Tensions between the United States and Iran continue to escalate after President Trump signed an executive order imposing new sanctions on the latter. Such sanctions have been described as “hard hitting,” which will prevent Iran’s Supreme Leader Ayatollah Ali Khamenei, Foreign Minister Javad Zarif and many other military officials from accessing U.S. financial instruments.
The sanctions followed the United States’ blame that the Islamic Republic attacked two oil tankers near the Strait of Hormuz and shot down a U.S. drone. Iran’s Revolutionary Guard alleged that the drone had entered Iranian airspace, even though U.S. military is adamant that it was in international airspace. Moreover, Iran’s Revolutionary Guard’s claim came after U.S. military informed of a missile attack on a Saudi desalination plant and stated that it is likely to have come from Yemen.
It goes without saying that while the Saudis and the United States are on one side, the Houthi Yemenis and Iran make up the other one. Tensions between the Saudis and Iran can primarily be attributed to the U.S. sanctions aimed at reducing Iranian oil exports to zero.
Nonetheless, Trump recently said in the Oval Office that these sanctions “represent a strong and proportionate response to Iran's increasingly provocative actions.” He added that “we will continue to increase pressure on Tehran until the regime abandons its dangerous activities and its aspirations including the pursuit of nuclear weapons, increased enrichment of uranium, development of ballistic missiles, engagement in and support for terrorism, fueling of foreign conflicts, and belligerent acts directed against the United States and its allies.”
Senior Iranian officials claimed that the country’s leadership sees “war and sanctions as two sides of the same coin” and emphasized that the Islamic State can never be forced into negotiation.
How to Play U.S. Sanctions on Iran?
Thanks to Trump’s announcement about “hard hitting” Iranian sanctions, the broader stock market has entered negative territory. But, not all asset classes are bleeding. Prices of both gold and bitcoin are climbing north as the United States hit Iran with fresh sanctions. And that’s primarily because these two asset classes are perceived as safe-haven assets and are unperturbed by market gyrations.
But, it’s just not rising geopolitical risks in the Middle East that’s driving gold and bitcoin. Gold, in particular, is gaining due to declining yields, weak macroeconomic outlook and a weaker dollar. This has led investment banking giant UBS to raise its short-term forecast for gold to $1,430 on Jun 24, from an earlier forecast of $1,380.
And when it comes to bitcoin, the world’s numero uno cryptocurrency is gaining as several Wall Street bigwigs are showing keen interest in cryptocurrencies and blockchain technology. For instance, Facebook’s Libra cryptocurrency has provided a boost to bitcoin. After all, Facebook’s foray into the crypto space has given a certain degree of legitimacy to the industry, which many viewed as illegal and speculative trading. Last but not the least, bitcoin has piqued the interest of many. Needless to say, bitcoin futures trading activity has been increasing over the past several weeks as shown by its moving average, per the CME Group.
New Iran sanctions, in the meantime, restricted the drop in oil prices amid concerns about crude demand. With oil prices finding support from US-Iran tensions, energy shares are in a good position to rally. Lest we forget, energy shares have been one of the weakest performers so far this year, but now this growing turmoil in the Middle East will lure investors back into the energy space.
Top 5 Gainers
We have, thus, selected five solid stocks from the aforesaid areas that can make the most of the US-Iran tensions. These stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy).
AngloGold Ashanti Limited AU operates as a gold mining company. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 2% over the past 60 days. The company’s expected earnings growth rate for the current year is 90.6% compared with the Mining - Gold industry’s estimated rally of 16.4%.
Square, Inc. SQ, which provides payment and point-of-sale solutions, is another impressive bitcoin-related stock. The mobile payment company is now allowing users to buy and sell cryptocurrency through its Square app. Square flaunts a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved 2.7% north over the past 60 days. The company’s expected earnings growth for the current year is 61.7%, higher than the Internet - Software industry’s projected growth of 12.7%.
Approach Resources, Inc. AREX focuses on the acquisition, exploration, development, and production of unconventional oil. The company carries a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 32% over the past 60 days. The company’s expected earnings growth rate for the current year is 23.1% against the Oil and Gas - Exploration and Production - United States industry’s anticipated decline of 7.2%.You can see the complete list of today’s Zacks #1 Rank stocks here.
Holly Energy Partners, L.P. HEP owns and operates petroleum product and crude pipelines. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has climbed 3.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 8.8% compared with the Oil and Gas - Production and Pipelines industry’s estimated rally of 3.3%.
Franco-Nevada Corporation FNV operates as a gold-focused royalty and stream company in the United States. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 5.6% over the past 60 days. The company, which is part of the Mining – Gold industry, is expected to yield an earnings return of almost 12% this year.
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