Tensions were boiling over with Iran, mid-2019.
In fact, in June 2019, Iran allegedly attacked two oil tankers near the Strait of Hormuz, allegedly attacked four oil tankers off the coast of the United Arab Emirates, and after it allegedly supported drone attacks on oil infrastructure and an airport in Saudi Arabia.
Then, Iran threatened to ramp up enrichment uranium.
During a news conference, an Iranian spokesman said the country had increased production fourfold and would exceed the limit of 300 kilograms. That would increase enrichment levels to 20% — pushing it towards weapons-grade material.
All as Tehran threatens to roll back its nuclear obligations a year after the Trump Administration withdrew from it and imposed devastating sanctions on the Iranian economy.
Israel Urging “Snapback Sanctions”
Given potential threats of a nuclear Iran, Israeli Prime Minister is urging world leaders to step up sanctions. “Should Iran deliver on its current threats, and violate the nuclear deal, the international community will have to implement, immediately, the pre-set sanctions mechanism, what is called ‘snapback sanctions’,” Netanyahu said, as quoted by Reuters.
Netanyahu added, reiterating a long-standing, if veiled, threat to take pre-emptive military action.
War Drums are Getting Louder
President Trump has already sent warships and bombers throughout the Persian Gulf.
White House National Security Advisor John Bolton also announced the deployment of the USS Abraham Lincoln strike group and a bomber task force in response to a “number of troubling and escalatory indications and warnings,” as quoted by Fortune.
Along with a threat of war, oil prices could accelerate higher, too.
Iran has already warned that the “first bullet fired in the Persian Gulf will push oil prices above $100. This would be unbearable to America, Europe and the U.S. allies like Japan and South Korea,” as quoted by CNBC.
So, it’s no wonder investors began to look at oil related ETFs, including:
SPDR Energy Select Sector ETF (XLE)
The Energy Select Sector SPDR Fund seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Energy Select Sector Index. It also seeks to provide precise exposure to companies in the oil, gas and consumable fuel, energy equipment and services industries. Not only does an ETF allow for diversification, you can buy it for less. For example, we can buy the SPDR Energy Select Sector ETF (XLE) for $61.52 a share. If we were to buy 100 shares, it would cost us $6,152.
If we were to buy some of the fund’s top holdings individually, it would cost much more than $6,152. Some of its top holdings include Exxon Mobil, Chevron Corporation, ConocoPhillips, EOG Resources, and Occidental Petroleum.
Inveseco DB Oil Fund (DBO)
This ETF seeks to track changes, whether positive or negative, in the level of the DBIQ Optimum Yield Crude Oil Index Excess Return plus the interest income from the Fund’s holdings of primarily US Treasury securities and money market income less the Fund’s expenses. It trades WTI crude futures, and traded at $9.24.
iShares Global Energy ETF (IXC)
The iShares Global Energy ETF seeks to track the investment results of an index composed of global equities in the energy sector. Trading at $31, some of its top holdings include Exxon Mobil, Chevron Corporation, BP PLC, Total SA, and EOG Resources.