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Safe Haven ETFs to Grab Amid Middle East Tensions

Sweta Jaiswal, FRM

The latest attacks on Saudi Arabia’s major crude facilities have made jittery investors resort to safer bets. The series of events following the strikes are pointing out to increased geopolitical tensions. The drone attacks took place at Aramco's largest oil processing plant site Abqaiq along with the Khurais oilfield. The raids have been so devastating that Saudi Arabia’s oil output is expected to be cut by almost half. Not to forget, China’s successively disappointing economic data for August also unnerved investors and intensified the appeal for safe-haven bets like gold, bonds and yen (read: Oil ETFs in Focus as Oil Rallies on Saudi Attacks).

Accordingly, there was a 1% rise in spot gold prices as of 07:39 GMT on Sep 16. 0.8% increase in the U.S. gold futures was also observed. Other precious metals like silver rose 3% and platinum inched up 0.7%. Moreover, palladium was up 1.2%. Further, yen increased 0.4% against the dollar.

The Middle East Tensions

The responsibility for the attacks on the Saudi Arabian crude facilities has been taken by Yemen’s Houthi rebels. Notably, Saudi Arabia and Yemen have been interlocked in a war since 2015. 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 (read: Leveraged Oil & Energy ETFs to Play on Saudi Attack).

While secretary of state Michael Pompeo blamed Iran for this disruption, the allegation was rejected by Tehran. This, in turn, is adding to analysts’ speculations of a military offensive on Iran. Also, the US officials claim that the drone attacks came from the directions that are hinting at Iran instead of Yemen.

Notably, the relations between the two countries turned bitter after Trump pulled out of a global nuclear pact and imposed fresh sanctions against Iran. Moreover, making the matters worse, Trump levied severe U.S. sanctions on Iran this year with the intention of blocking its oil exports (read: Saudi Oil Attack: Sector ETF Winners and Losers).

Commenting on this situation, U.N. Yemen envoy Martin Griffiths told the U.N. Security Council that the possibilities of a regional conflict are not ruled out. Countering it, Kelly Craft, US ambassador to UN, has claimed that early investigation “indicates that responsibility lies with Iran”.

What is more intimidating is that Houthis have warned of more strikes in the future. Its military spokesman Yahya Sarea has tweeted that “we assure the Saudi regime that our long arm can reach any place we choose and at the time of our choosing. We warn companies and foreigners against being near the plants that we struck because they are still in our sights”.

ETFs to Grab

Treasury Bonds 

iShares 20+ Year Treasury Bond ETF TLT

Heightened global uncertainty brings this safe asset into the limelight. Fed’s rate cuts this year and geopolitical woes may drive treasury valuation. Apart from TLT, investors can consider 25+ Year Zero Coupon U.S. Treasury Index Fund ZROZ and Vanguard Extended Duration Treasury ETF EDV (read: Play the Bond Bull Market With These ETFs).

Gold

SPDR Gold Trust ETF GLD)

Gold is often viewed as a safe-haven asset offering protection against financial risks and may even perform well at a time of heightened market volatility (read: 5 ETF Zones to Watch Ahead of Fed Meeting).

Apart from GLD, investors can consider iShares Gold Trust IAU, another popular choice in this space (read: How to Bet on Gold Surge With ETFs & Stocks).

Yen
 
Invesco CurrencyShares Japanese Yen Trust FXY

The Japanese yen is often considered a classic safe-haven asset that has gained some strength of late. Investors can target this currency via FXY, which measures the value of yen against the greenback (see: all the Currency ETFs here) (read: Trade War Gets Uglier: Here Are the ETF Winners & Losers)

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Vanguard Extended Duration Treasury ETF (EDV): ETF Research Reports
 
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ): ETF Research Reports
 
iShares 20+ Year Treasury Bond ETF (TLT): ETF Research Reports
 
SPDR Gold Shares (GLD): ETF Research Reports
 
iShares Gold Trust (IAU): ETF Research Reports
 
Invesco CurrencyShares Japanese Yen Trust (FXY): ETF Research Reports
 
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