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Iran Downs U.S. Drone: Sector ETFs & Stocks to Gain

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Geopolitical tension between Iran and the United States flared up lately after the United States and Iranian officials said the latter downed a U.S. military drone near the Strait of Hormuz. In any case, both countries have been at loggerheads for about a year.

Last August, the United States is putting into effect sanctions against Iran, targeting the Islamic Republic’s currency and key industries. These sanctions are part of President Donald Trump’s initiative to put an embargo on Iran’s missile and nuclear programs, and diminish its influence in the Middle East.

Then in November, the United States formally levied the second part of the sanctions that banned import of Iranian energy. However, Washington had also offered temporary waivers to eight key buyers, China, India, Greece, Italy, Taiwan, Japan, Turkey and South Korea at that time, allowing them to continue to import oil from Iran. But, in April 2019, Washington announced it won’t renew waivers previously granted on Iran oil import sanctions (read: US Tightens Sanctions on Iran: Country ETFs to Gain/Suffer).

Investors should note that Iran has been accused of several oil tanker attacks near the Strait of Hormuz as well as stabbings in oil facilities and an airport in Saudi Arabi in recent months. The repeated assault near the Strait of Hormuz, which makes up about 30% of the world’s seaborne oil traffic, means a lot to the oil industry.

Sector ETFs & Stocks to Gain

Energy

Oil prices have been steady these days thanks to a host of factors like repeated assaults nearthe Strait of Hormuz, a subdued greenback in the wake of dovish Fed hints and the likely extension of the OPEC output cut deal. No wonder, United States Oil Fund LP (USO - Free Report) rose 4.6% on Jun 20.

iShares U.S. Energy ETF (IYE - Free Report) has a Zacks ETF Rank #3 (Hold) with a High-risk outlook. The stock gained 2.3% on Jun 20.

Chevron Corporation (CVX - Free Report) is one of the world's leading integrated energy companies. It has a Zacks Rank #2. The stock gained more than 1.1% on Jun 20.

Gold Miner

Flare-up in geopolitical risks always benefits the safe-haven asset gold. Added to this, the metal has benefited out of a dovish Fed in recent trading sessions. SPDR Gold Shares (GLD - Free Report) was up 2.5% on Jun 20. Gold mining stocks normally act as a leveraged play of the underlying asset (read: ETF Winners & Losers Post Fed Meet).

VanEck Vectors Gold Miners ETF (GDX - Free Report) , which tracks the overall performance of companies involved in the gold mining industry,gained 4.4%on Jun 20.

AngloGold Ashanti Limited (AU - Free Report) is the largest gold producer at 7 million ounces a year, with reserves of 126 m oz. The stock has a Zacks Rank #1 (Strong Buy) and advanced 6.9% on Jun 20.

Defense

Iran’s downing of the U.S. drone has charged up defense stocks in anticipation of a harsh conflict.

iShares U.S. Aerospace & Defense ETF (ITA - Free Report) , which tracks the performance of the aerospace and defense sector of the U.S. equity market, added 1.8%. The fund also has a Zacks Rank #2.

Lockheed Martin Corporation (LMT - Free Report) is a global security and aerospace company principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. The stock also has a Zacks Rank #2 and added about 2% on Jun 20.

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