Yahoo Finance 4 ETF Areas to Benefit From Escalating Middle East Conflict
The growing Middle East crisis, particularly between Israel and Gaza, is becoming a major concern for investors. The conflict escalated after the deadly blast at a hospital in Gaza City that killed hundreds of people.
If the conflict expands further, it could likely cause global inflation and, subsequently, an acceleration in interest rates around the world. It may have repercussions for global stocks markets and economy. However, some sectors or corners of the broad market are expected to gain or see increased attention amid such geopolitical tensions. We have highlighted them below:
Gold
The ongoing geopolitical tension has sent investors rushing for safe-haven assets like gold. This is especially true as gold is often used as a means of preserving wealth during times of financial and political uncertainty. It usually does well when other asset classes struggle. Gold prices have surged about $100 since the Israel-Hamas war began (read: Gold Mining ETFs Shine on Safe Haven Rush).
Metal miners are the biggest beneficiaries of the surge in gold price as mining companies act as a leveraged play on the underlying metal prices and thus tend to experience more gains than their bullion cousins in a rising metal market. iShares MSCI Global Gold Miners ETF RING, US Global GO GOLD and Precious Metal Miners ETF GOAU and VanEck Gold Miners ETF GDX have gained more than 5% over the past week and are likely to do so if the conflict intensifies further.
Defense
Rising geopolitical tensions could result in increased defense spending by the United States and its European allies. As such, ETFs tracking the defense companies saw solid inflows over the past 10 days. Invesco Aerospace & Defense ETF (PPA) has attracted $72.7 million in its asset base followed by inflows of $49.5 million for iShares U.S. Aerospace & Defense ETF ITA and $16.8 million for SPDR S&P Aerospace & Defense ETF XAR. The three ETFs have gained in the range of 0.5%-1.1% each over the past week. These funds have a Zacks ETF Rank #2 (Buy) or #3 (Hold) (read: Defense Stocks & ETFs Soar Amid Rising Geopolitical Tensions).
Energy
The political uncertainty across the Middle East has threatened oil supply, thereby leading to an oil price surge. Notably, the Middle East is home to almost a third of global supply. After rising more than 4% last week, U.S. crude oil extended its rise this week and reached close to $90 per barrel. Most analysts believe a full-blown regional conflict could send oil prices surging well above $100 a barrel, risking a global recession.
While several ETFs targeting the oil sector look to tap the rising oil price, iShares U.S. Oil & Gas Exploration & Production ETF IEO, Invesco Dynamic Energy Exploration & Production ETF PXE, SPDR S&P Oil & Gas Exploration & Production ETF XOP and First Trust Energy AlphaDEX Fund FXN rose more than 3% each over the past week. These ETFs have a solid Zacks ETF Rank #1 (Strong Buy) or #2 (read: Oil Soars On Israel-Hamas Conflict: Sector ETFs to Gain/Lose).
Small-Caps
As escalating tensions in the Middle East remain an overhang, small-cap ETFs seem a prudent choice. This is because small-cap stocks are considered safer and better plays if political issues or economic turmoil creep into the picture. This is because the pint-sized stocks generate most of their revenues from the domestic market.
iShares Core S&P Small-Cap ETF IJR, Vanguard Small-Cap ETF VB, and Schwab U.S. Small-Cap ETF SCHA having a Zacks ETF Rank #1 could be solid plays.
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iShares U.S. Oil & Gas Exploration & Production ETF (IEO): ETF Research Reports
VanEck Gold Miners ETF (GDX): ETF Research Reports
SPDR S&P Oil & Gas Exploration & Production ETF (XOP): ETF Research Reports
iShares U.S. Aerospace & Defense ETF (ITA): ETF Research Reports
SPDR S&P Aerospace & Defense ETF (XAR): ETF Research Reports
First Trust Energy AlphaDEX ETF (FXN): ETF Research Reports
iShares MSCI Global Gold Miners ETF (RING): ETF Research Reports
iShares Core S&P Small-Cap ETF (IJR): ETF Research Reports
Schwab U.S. Small-Cap ETF (SCHA): ETF Research Reports
Vanguard Small-Cap ETF (VB): ETF Research Reports
Invesco Energy Exploration & Production ETF (PXE): ETF Research Reports
U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU): ETF Research Reports
