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ETFs in Focus as Oil Spurts on Rising Middle East Tensions

Sweta Jaiswal, FRM

Tensions in the Middle East have escalated ever since the globally-criticized attacks on Saudi Arabia’s crude facilities. The devastating drone attacks, on Aramco's largest oil processing plant site Abqaiq along with the Khurais oilfield, are expected to cut Saudi Arabia’s oil output by almost half (read: Profit From the Oil Rush With These ETFs).

Intensifying Middle East Tensions

Notably, Yemen’s Houthi rebels have taken responsibility for the attacks. However, per a Reuters article, Saudi Arabia has expressed concerns over utilization of Iranian weapons to carry out the attacks. It has requested U.N. experts to assess the incident. Moreover, secretary of state Michael Pompeo blamed Iran for this disruption, while the allegation was rejected by Tehran. 

In fact, U.K.’s Prime Minister Boris Johnson has also blamed Iran for the attack. He is willing to participate in United States’ military efforts to enhance the security of the Gulf Kingdom (read: Leveraged Oil & Energy ETFs to Play on Saudi Attack).

However, Iran continues to deny its role in the drone attacks and has warned of a possible “all-out war” if any retaliatory action is taken against it.

Meanwhile, Trump administration recently announced plans to tighten security in Saudi Arabia and the United Arab Emirates by sending more officials and missile defense equipment. However, Iran’s president recently called out for Western powers to let the regional nations led by Tehran look after the security of the Persian Gulf.

Moreover, there are speculations that Saudi Arabia might need more time to return to its full capacity than the 10 weeks claimed by the Gulf nation. Per a Wall Street Journal report, repairs could require many months and may come at a massive cost of around hundreds of millions of dollars (read: Saudi Attack Threatens Oil Supply: Energy ETFs Set to Soar).

Tensions Brewing Over Iran’s Nuclear Program

Iran has raised its enrichment levels for uranium from the agreed 3.7% under the Joint Comprehensive Plan of Action (JCPOA) act to 5%, while keeping it below the 20% threshold. Tehran had also earlier announced that it will keep breaching agreements under the deal every 60 days, lest the European signatories to the JCPOA deal  protect it from the sanctions imposed by President Trump.

ETFs in Focus

This has compelled many investors to take a closer look at the oil commodity space and related ETFs (see all Energy ETFs here).

United States Brent Oil Fund BNO

The fund tracks the daily price movements of Brent crude oil (read: ETFs to Win as Saudi's New Minister May Seek Same Oil Policy).

AUM: $82 million

Expense Ratio: 0.90%

1-Month Return: 10.5%

United States Oil Fund USO

The United States Oil Fund seeks to track the daily price movement of WTI light, sweet crude oil (read: Guide to 25 Most-Liquid ETFs).

AUM: $1.43 billion

Expense Ratio: 0.73%

1-Month Return: 9%

VanEck Vectors Oil Services ETF OIH

This fund tracks the MVIS U.S. Listed Oil Services 25 Index, which offers exposure to the companies involved in oil services to the upstream oil sector, including oil equipment, oil services or oil drilling (read: 5 Top-Performing Energy ETFs Over the Past Week).

AUM: $686.4 million

Expense Ratio: 0.35%

1-Month Return: 17%

SPDR S&P Oil & Gas Equipment & Services ETF XES

This fund tracks the S&P Oil & Gas Equipment & Services Select Industry Index, which measures the performance of the companies engaged in the oil and gas equipment and services industry (read: Worst Sector ETFs of August).

AUM: $140.2 million

Expense Ratio: 0.35%

1-Month Return: 16.9%

iShares U.S. Oil Equipment & Services ETF IEZ

This ETF offers exposure to U.S. companies that provide equipment and services for oil exploration and extraction by tracking the Dow Jones U.S. Select Oil Equipment & Services Index.

AUM: $90.4 million

Expense Ratio: 0.42%

1-Month Return: 16.7%

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VanEck Vectors Oil Services ETF (OIH): ETF Research Reports
 
United States Oil Fund, LP (USO): ETF Research Reports
 
SPDR S&P Oil & Gas Equipment & Services ETF (XES): ETF Research Reports
 
iShares U.S. Oil Equipment & Services ETF (IEZ): ETF Research Reports
 
United States Brent Oil Fund LP (BNO): ETF Research Reports
 
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