Houthi Attacks in Red Sea to Boost These ETF Areas
In an interview with American television station CNBC, Daan Struyven, head of Goldman Sachs' oil research division, expressed concerns about the impact of Houthi rebel disruptions on oil prices, as quoted on oilprice.com.
He emphasized that the Red Sea serves as a critical transit route for oil, and any prolonged disruption in this region could result in oil prices increasing by three to four dollars. However, if a disruption were to occur in the Strait of Hormuz and persisted for a month or longer, it could lead to a staggering 20% price increase, potentially even doubling oil prices.
Against this backdrop, below we highlight a few ETF investing areas that could gain if Houthi attacks in red sea continue.
Oil ETFs
While there were occasional minor spikes in oil prices in early to mid-December due to these actions, overall market volatility has remained relatively low. But if the attacks continue, oil ETFs should gain ahead. United States Oil Fund LP USO, Invesco DB Oil Fund DBO, ProShares K-1 Free Crude Oil Strategy ETF OILK and United States 12 Month Oil Fund LP USL added about 0.1% past week (as of Jan 5, 2024).
Shipping ETFs
Houthi rebels have attacked commercial shipping more than 20 times since November, deploying various methods. Major shipping companies like Maersk and Hapag Lloyd are avoiding Red Sea and Suez Canal routes due to security concerns. Maersk had a vessel come under attack from rebels, further highlighting the risks involved.
This has boosted the shipping ETFs in recent times as Breakwave Dry Bulk Shipping ETF BDRY, SonicShares Global Shipping ETF BOAT and U.S. Global Sea to Sky Cargo ETF SEA added 8.6%, 13.6% and 11.2%, respectively, in the past one month.
Defense ETFs
Defense stocks and ETFs should gain ahead as the United States and 12 allies issued final warning to Houthi rebels to cease their attacks on vessels in the Red Sea or face potential targeted military action, as quoted on economic times.
Operation Prosperity Guardian has been initiated by the United States to protect commercial traffic, with support from other countries like the UK, Australia, and Canada. Lately, U.S. helicopters opened fire on Houthi rebels after they attacked a cargo ship in the Red Sea, killing several of them. This indicates that the defense ETFs should be on the rise. These ETFs include iShares U.S. Aerospace & Defense ETF ITA, Invesco Aerospace & Defense ETF PPA and SPDR S&P Aerospace & Defense ETF XAR.
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)
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United States Oil ETF (USO): ETF Research Reports
Invesco DB Oil ETF (DBO): ETF Research Reports
United States 12 Month Oil ETF (USL): ETF Research Reports
iShares U.S. Aerospace & Defense ETF (ITA): ETF Research Reports
Invesco Aerospace & Defense ETF (PPA): ETF Research Reports
SPDR S&P Aerospace & Defense ETF (XAR): ETF Research Reports
U.S. Global Sea to Sky Cargo ETF (SEA): ETF Research Reports
ProShares K-1 Free Crude Oil Strategy ETF (OILK): ETF Research Reports
Breakwave Dry Bulk Shipping ETF (BDRY): ETF Research Reports
SonicShares Global Shipping ETF (BOAT): ETF Research Reports
