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Risks Aren't Fading in the Energy Markets: ETFs to Gain
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Key Takeaways
Ceasefire relief is temporary; structural supply risks still dominate the energy markets.
Infrastructure damage to keep oil supply tight despite diplomatic progress.
Energy ETFs stand to benefit from sustained strength in oil prices.
Oil prices pulled back sharply after news of a two-week ceasefire emerged earlier this week, reversing part of the surge driven by the ongoing Middle East conflict. President Trump indicated that the ceasefire depends on the full and immediate reopening of the Strait of Hormuz, as quoted on CNBC. The ceasefire announcement triggered a steep fall in the U.S. benchmark, West Texas Intermediate (WTI) crude, bringing its five-day loss to 14.26%, per OilPrice.com.
However, even as U.S. and Iranian officials prepare to begin negotiations on Saturday, shipping activity through the Strait of Hormuz remains severely constrained, with little sign of normalization across this critical global energy artery, according to Yahoo Finance.
Although the ceasefire is contingent on reopening the strait, Tehran’s tighter grip on transit flows underscores how fragile any recovery in energy supply chains remains. Per comments from senior Iranian officials, as reported by Russian state media and as quoted on the above-mentioned Yahoo Finance article, only around 15 vessels per day will be allowed to transit during the ceasefire, well below the pre-conflict levels, when more than 100 ships crossed the waterway daily.
Infrastructure Damage Keeps Supply Under Pressure Post-Conflict
More broadly, the turmoil in the energy markets is far from resolved. Even if the strait reopens and vessel traffic gradually returns to the near pre-conflict levels, it is unlikely to deliver full relief, as damage to critical infrastructure across the Middle East continues to weigh on supply. As a result, oil prices could remain elevated even in the event of a more durable resolution to the conflict.
Tolls Replace Blockages: Here’s Why Oil Prices May Not Fall Back
Even if the Strait of Hormuz reopens, the potential imposition of transit tolls on passing vessels could keep energy prices elevated, effectively ruling out a return to the pre-conflict oil price levels.
According to FT, as quoted on the above-mentioned Yahoo Finance article, Iran appears poised to monetize its control of the strait, proposing to impose a $1-per-barrel toll on oil cargoes transiting the Strait of Hormuz, with payments to be made in cryptocurrency.
Energy ETFs Worth Watching
Oil markets are likely to remain structurally tight, keeping prices elevated well beyond any permanent resolution of the conflict. WTI Crude has risen 10.75% over the past month and 41.56% year to date.
This backdrop creates a compelling case for investors to consider ETFs that could benefit from elevated oil prices in the post Middle East conflict environment. However, investors should approach the opportunity with a long-term perspective.
Investors can consider State Street Energy Select Sector SPDR ETF (XLE - Free Report) , Vanguard Energy ETF (VDE - Free Report) , State Street SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) , iShares Global Energy ETF (IXC - Free Report) and iShares U.S. Energy ETF (IYE - Free Report) .
With a one-month average trading volume of 60.53 million shares, XLE is the most liquid option, offering investors easier entry and exit while minimizing the risks of significant price fluctuations, ideal for active trading strategies.
XLE has gathered an asset base of $42.12 billion, the largest asset base among the other options. Regarding charging annual fees, XLE is the cheapest option, charging 0.08%, suitable for long-term investing.
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Risks Aren't Fading in the Energy Markets: ETFs to Gain
Key Takeaways
Oil prices pulled back sharply after news of a two-week ceasefire emerged earlier this week, reversing part of the surge driven by the ongoing Middle East conflict. President Trump indicated that the ceasefire depends on the full and immediate reopening of the Strait of Hormuz, as quoted on CNBC. The ceasefire announcement triggered a steep fall in the U.S. benchmark, West Texas Intermediate (WTI) crude, bringing its five-day loss to 14.26%, per OilPrice.com.
However, even as U.S. and Iranian officials prepare to begin negotiations on Saturday, shipping activity through the Strait of Hormuz remains severely constrained, with little sign of normalization across this critical global energy artery, according to Yahoo Finance.
Although the ceasefire is contingent on reopening the strait, Tehran’s tighter grip on transit flows underscores how fragile any recovery in energy supply chains remains. Per comments from senior Iranian officials, as reported by Russian state media and as quoted on the above-mentioned Yahoo Finance article, only around 15 vessels per day will be allowed to transit during the ceasefire, well below the pre-conflict levels, when more than 100 ships crossed the waterway daily.
Infrastructure Damage Keeps Supply Under Pressure Post-Conflict
More broadly, the turmoil in the energy markets is far from resolved. Even if the strait reopens and vessel traffic gradually returns to the near pre-conflict levels, it is unlikely to deliver full relief, as damage to critical infrastructure across the Middle East continues to weigh on supply. As a result, oil prices could remain elevated even in the event of a more durable resolution to the conflict.
Tolls Replace Blockages: Here’s Why Oil Prices May Not Fall Back
Even if the Strait of Hormuz reopens, the potential imposition of transit tolls on passing vessels could keep energy prices elevated, effectively ruling out a return to the pre-conflict oil price levels.
According to FT, as quoted on the above-mentioned Yahoo Finance article, Iran appears poised to monetize its control of the strait, proposing to impose a $1-per-barrel toll on oil cargoes transiting the Strait of Hormuz, with payments to be made in cryptocurrency.
Energy ETFs Worth Watching
Oil markets are likely to remain structurally tight, keeping prices elevated well beyond any permanent resolution of the conflict. WTI Crude has risen 10.75% over the past month and 41.56% year to date.
This backdrop creates a compelling case for investors to consider ETFs that could benefit from elevated oil prices in the post Middle East conflict environment. However, investors should approach the opportunity with a long-term perspective.
Investors can consider State Street Energy Select Sector SPDR ETF (XLE - Free Report) , Vanguard Energy ETF (VDE - Free Report) , State Street SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) , iShares Global Energy ETF (IXC - Free Report) and iShares U.S. Energy ETF (IYE - Free Report) .
With a one-month average trading volume of 60.53 million shares, XLE is the most liquid option, offering investors easier entry and exit while minimizing the risks of significant price fluctuations, ideal for active trading strategies.
XLE has gathered an asset base of $42.12 billion, the largest asset base among the other options. Regarding charging annual fees, XLE is the cheapest option, charging 0.08%, suitable for long-term investing.