ETF Areas to Win/Lose Amid Middle East Tensions

Core Insights - Oil futures have surged sharply due to escalating conflicts in the Middle East, with Brent crude surpassing $82 per barrel and WTI crude crossing $70 per barrel, marking levels not seen since January 2025 [1][2] Military Escalation - The price increase followed extensive air strikes by the United States and Israel against Iran, aimed at dismantling Iran's nuclear program and regime [2] - Iranian Supreme Leader Ali Khamenei was reportedly killed during these strikes, prompting Iran to retaliate with missile attacks on U.S. military assets and energy infrastructure in Gulf states [3] Supply Risks - The Strait of Hormuz, a critical oil shipping chokepoint, is under scrutiny as it handles about one-fifth of global oil supply daily [4] - Approximately 15 million barrels per day typically transit the Strait, but disruptions could leave around 8 million barrels per day stranded, as regional pipelines can only reroute 5-7 million barrels daily [5] Sector ETFs to Gain - Energy ETFs, particularly the United States Brent Oil Fund LP (BNO), are expected to benefit from rising oil prices, with OPEC+ raising production quotas by 220,000 barrels per day [7] - Oil prices could exceed $100 per barrel if tanker flows are not restored quickly, with BNO gaining about 6.6% pre-market [8] - Shipping ETFs like SonicShares Global Shipping ETF (BOAT) are also likely to surge, with BOAT increasing about 5% pre-market [9][11] - Gold ETFs, such as SPDR Gold Shares (GLD), are rallying as gold is viewed as a safe haven asset amid tensions, with GLD adding about 2.2% pre-market [12] - Defense ETFs, including iShares U.S. Aerospace & Defense ETF (ITA), are performing well during warfare, with ITA gaining 3.5% pre-market [13] Sector ETFs to Lose - Oil refiners, represented by VanEck Oil Refiners ETF (CRAK), are likely to suffer as rising crude prices reduce profitability, with CRAK losing about 1.6% pre-market [14] - Retail ETFs, such as SPDR S&P Retail ETF (XRT), are expected to decline due to increased consumer costs from rising energy prices [15] - The iShares India 50 ETF (INDY) may face challenges as India relies heavily on oil imports, making it vulnerable to price increases [16] - Airlines, represented by U.S. Global Jets ETF (JETS), are likely to underperform as energy costs rise, with JETS losing 3.3% pre-market [17]