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Should You Avoid Travel ETFs Altogether Amid Iran Tensions?
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Key Takeaways
Airline ETF JETS fell over 10% as war-triggered disruptions hit global aviation.
Diversified travel ETFs like BEDZ, AWAY and PEJ remain relatively resilient.
Rising jet fuel costs may pressure airlines if Middle East tensions persist.
The ongoing conflict between the United States, Israel and Iran is severely disrupting global travel, leaving millions of passengers stranded and threatening the tourism industry. Iran launched retaliatory strikes targeting several countries, including the United Arab Emirates, Qatar, Jordan, Israel and Cyprus. The situation has severely limited airline operations.
The U.S. Department of State said it is arranging charter flights to evacuate Americans from Saudi Arabia, Israel, the United Arab Emirates and Qatar, as quoted on CNBC. No wonder, US Global Jets ETF (JETS - Free Report) has lost more than 10% over the past week. CNBC noted that the Iran war threatens the $11.7 trillion global travel industry.
Hotels and Cruise Lines Impacted
The conflict has also affected hotels and cruise operators. Cruise ships have also been stranded. The MSC Cruises confirmed that its ship MSC Euribia, carrying more than 6,300 passengers, remains stuck in Dubai. The cruise operator has also canceled the remainder of its winter sailings from Dubai, as quoted on the same CNBC article.
How Long Will the War Last?
The United States claimed that the military operation in Iran should only last “four to five weeks.”But “experts say the U.S. could easily get bogged down in “Operation Epic Fury” if the Iranian regime proves more resilient than expected,” as mentioned in the same CNBC article.
Should You Avoid U.S.-Listed Travel ETFs?
If the war lasts longer, investors may want to keep their distance from the below-mentioned exchange-traded funds. But note that all U.S.-listed travel ETFs are not Middle East-focused.
AdvisorShares Hotel ETF (BEDZ - Free Report) is an actively managed exchange-traded fund that seeks to achieve its investment objective by investing at least 80% of its net assets in securities of companies that derive at least 50% of their net revenue from the hotel business. BEDZ has gained 2.2% over the past week.
The ETF BEDZ holds top hotels like Marriott, Host Hotels and cruise operators like Royal Caribbean. But their operations are spread out and not only Middle East–focused. Hence, the ETF doesn’t face much threat.
Amplify Travel Tech ETF (AWAY - Free Report) has lost only 1.4% over the past week. Uber, Airbnb, Expedia have exposure to this ETF and their global operations make the fund diversified.
Invesco Leisure and Entertainment ETF (PEJ - Free Report) has dipped only 0.7% over the past week and proved its resilience amid the Iran tensions. Though United Airlines has prominent exposure to the fund, other companies like Warner Bros, Live Nation, Hilton, DoorDash, and Uber helped the fund stay steady with its expanded exposure.
Airlines’ Loss
Huge aviation disruptions caused by the conflict have led to more than 23,000 global flight cancellations and costs surpassing $1 billion, including fuel, rerouting and revenue impacts, as quoted on Wionews.
While U.S. airlines do not have much exposure to the Middle East, rising fuel prices are a key concern. Jet fuel expenses generally make up 20%-30% of an airline's operating costs. U.S. airlines normally do not hedge fuel, which is a key cost pressure if they cannot pass higher prices on to customers, as quoted on S&P Global.
S&P Global went on to explain that the crack spread to jet fuel may further widen due to higher military demand and tight refinery capacity, putting airlines stocks in a concerning zone. Hence, investors who do not have a strong stomach for risks, may opt to stay away from the ETF JETS.
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Should You Avoid Travel ETFs Altogether Amid Iran Tensions?
Key Takeaways
The ongoing conflict between the United States, Israel and Iran is severely disrupting global travel, leaving millions of passengers stranded and threatening the tourism industry. Iran launched retaliatory strikes targeting several countries, including the United Arab Emirates, Qatar, Jordan, Israel and Cyprus. The situation has severely limited airline operations.
The U.S. Department of State said it is arranging charter flights to evacuate Americans from Saudi Arabia, Israel, the United Arab Emirates and Qatar, as quoted on CNBC. No wonder, US Global Jets ETF (JETS - Free Report) has lost more than 10% over the past week. CNBC noted that the Iran war threatens the $11.7 trillion global travel industry.
Hotels and Cruise Lines Impacted
The conflict has also affected hotels and cruise operators. Cruise ships have also been stranded. The MSC Cruises confirmed that its ship MSC Euribia, carrying more than 6,300 passengers, remains stuck in Dubai. The cruise operator has also canceled the remainder of its winter sailings from Dubai, as quoted on the same CNBC article.
How Long Will the War Last?
The United States claimed that the military operation in Iran should only last “four to five weeks.”But “experts say the U.S. could easily get bogged down in “Operation Epic Fury” if the Iranian regime proves more resilient than expected,” as mentioned in the same CNBC article.
Should You Avoid U.S.-Listed Travel ETFs?
If the war lasts longer, investors may want to keep their distance from the below-mentioned exchange-traded funds. But note that all U.S.-listed travel ETFs are not Middle East-focused.
AdvisorShares Hotel ETF (BEDZ - Free Report) is an actively managed exchange-traded fund that seeks to achieve its investment objective by investing at least 80% of its net assets in securities of companies that derive at least 50% of their net revenue from the hotel business. BEDZ has gained 2.2% over the past week.
The ETF BEDZ holds top hotels like Marriott, Host Hotels and cruise operators like Royal Caribbean. But their operations are spread out and not only Middle East–focused. Hence, the ETF doesn’t face much threat.
Amplify Travel Tech ETF (AWAY - Free Report) has lost only 1.4% over the past week. Uber, Airbnb, Expedia have exposure to this ETF and their global operations make the fund diversified.
Invesco Leisure and Entertainment ETF (PEJ - Free Report) has dipped only 0.7% over the past week and proved its resilience amid the Iran tensions. Though United Airlines has prominent exposure to the fund, other companies like Warner Bros, Live Nation, Hilton, DoorDash, and Uber helped the fund stay steady with its expanded exposure.
Airlines’ Loss
Huge aviation disruptions caused by the conflict have led to more than 23,000 global flight cancellations and costs surpassing $1 billion, including fuel, rerouting and revenue impacts, as quoted on Wionews.
While U.S. airlines do not have much exposure to the Middle East, rising fuel prices are a key concern. Jet fuel expenses generally make up 20%-30% of an airline's operating costs. U.S. airlines normally do not hedge fuel, which is a key cost pressure if they cannot pass higher prices on to customers, as quoted on S&P Global.
S&P Global went on to explain that the crack spread to jet fuel may further widen due to higher military demand and tight refinery capacity, putting airlines stocks in a concerning zone. Hence, investors who do not have a strong stomach for risks, may opt to stay away from the ETF JETS.