While investors have been fanatically chasing artificial intelligence (AI) stocks, something far more mundane has quietly delivered the year's most spectacular returns. With geopolitical instability in the Middle East sending charter rates into overdrive, tanker operators have taken in record cash flows.

Consequently, freight companies, particularly those moving oil through increasingly dangerous waters, and, by extension, exchange-traded funds (ETFs) holding these stocks, are experiencing a profit boom unlike anything in recent memory. Leading this rally is Breakwave Tanker Shipping ETF (BWET Quick QuoteBWET - Free Report) , which has jumped over 3,700% year to date, far outpacing top-performing tech stocks and broader market benchmarks.

Against this backdrop, investors seeking returns uncorrelated with the AI trade might want exposure to ETFs that hold ocean freight assets.
But before doing so, one must understand the structural factors behind this surge and what could continue to drive strong shipping momentum ahead.

What Caused Freight Rates to Explode?

The underlying catalyst for skyrocketing freight rates stems from maritime chokepoint disruptions at the Strait of Hormuz that we have been witnessing for the past several months. 

Before the outbreak of the current conflict involving Iran, the strategic waterway typically handled roughly 125 large commercial vessels per day, including oil tankers, LNG carriers and container ships. Today, that number has collapsed dramatically to single digits, as reported by Reuters.  

The bottleneck at the Strait of Hormuz is forcing vessels to reroute around the Cape of Good Hope, with longer voyage distances effectively reducing global fleet capacity by extending transit times. This, combined with low order books for new Very Large Crude Carriers (VLCCs) and war-risk premiums now charged for the risky transit via the Strait of Hormuz, sent daily spot charter rates for Middle East-to-Asia routes doubling and reaching historic highs this year. 

Notably, over 140,000 shipping disruptions have been recorded this year, following the U.S.-Iran war, with the weekly average jumping from roughly 1,000 to over 9,000 at crisis peak, according to Project44, as cited in CNBC.

Beyond the tensions in the Middle East, drought-related disruptions at the Panama Canal and fresh altercation at the Red Sea due to new Houthi attacks might also have played a minor role in the aforementioned disruptions. 

Consequently, supertanker hire rates on critical Middle East routes skyrocketed from $75,000-$100,000 per day to nearly $470,000, with earnings from a single day even crossing a staggering $800,000 on the Baltic Exchange's benchmark Middle East-to-China shipping route.

The impact of this on shipping company revenues and earnings has been dramatic. For instance, international shipping giant Frontline PLC (FRO Quick QuoteFRO - Free Report) reported record adjusted earnings of $2.61 per share for the second quarter of 2026, representing a massive 625% increase from the year-ago period’s level. This bottom-line surge was supported by a 96% year-over-year jump in FRO’s quarterly revenues. 

International Seaways (INSW Quick QuoteINSW - Free Report) reported record second-quarter net income of $295 million, which skyrocketed 375.8% year over year. This increase was primarily driven by higher time charter equivalent (TCE) revenues, reflecting an approximately $51,500-per-day increase in spot earnings across the fleet, as well as higher profit-sharing results from applicable time charters. Shipping revenues improved 138.3% year over year, while TCE revenues surged a solid 129.6%. 

Crude oil tanker operator DHT Holdings (DHT Quick QuoteDHT - Free Report) reported the strongest quarterly result in the second quarter of 2026. Its shipping revenues improved 122.7% year over year, while net profit surged 254.1% on the back of exceptionally strong tanker market conditions.

Will the Momentum Sustain?

Unlike tech sector rallies tied to AI adoption schedules, the shipping industry's momentum is anchored in physical supply-and-demand imbalances. 

The long lead times required to construct new ocean vessels ensure global fleet capacity will remain constrained over the near term. To this end, it is imperative to mention that a Morgan Stanley report published in May 2026 indicated that the global tanker orderbook exceeded 20% of the existing fleet as of April 2026, with these vessels expected to be delivered over the next three to five years.

The bank also expects the tanker orderbook-to-fleet ratio to potentially double by 2030 from its end-2025 level, driven by a combination of accelerating vessel demolitions and new orders to serve longer trade routes.

Also, insurance costs have become prohibitive, with war-risk premiums for Gulf transit now reaching 10% of cargo value, with transit costs running $10-$20 million per voyage. Given the prevailing geopolitical tensions in the Middle East, no near-term reduction in these costs is expected.

All these developments suggest that the shipping industry will continue its strong rally over the next couple of years. 

Freight ETFs to Watch

Against the current backdrop, investors concerned about AI-led capex bubbles may want to keep the following ETFs on their watchlist and invest once it seems fit, with freight's boom stemming from physical constraints and not computational power: 

Breakwave Tanker Shipping ETF (BWET Quick QuoteBWET - Free Report)

This fund, with net assets worth $263.6 million, reflects the daily price movements of indices that track the future cost of transporting crude oil.

BWET has skyrocketed 3,700% year to date and charges 350 basis points (bps) in fees. It traded at a volume of 0.28 million shares in the last trading session. 

SonicShares Global Shipping ETF (BOAT Quick QuoteBOAT - Free Report)

This fund, with net assets worth $109.8 million, offers exposure to global shipping companies engaged in the maritime transportation of goods and raw materials, including consumer and industrial products, vehicles, dry bulk, crude oil and liquefied natural gas. FRO holds the first spot in this fund, with 5.27% weightage, while INSW holds the eighth position with 4.16% weightage.

BOAT has surged 64.7% year to date and charges 69 bps in fees. It traded at a volume of 0.09 million shares in the last trading session. 

Breakwave Dry Bulk Shipping ETF (BDRY Quick QuoteBDRY - Free Report)

This fund, with net assets worth $38.5 million, reflects the daily price movements of the near-dated dry bulk freight futures. 

BDRY has jumped 82.6% year to date and charges 350 bps in fees. It traded at a volume of 0.05 million shares in the last trading session. 

U.S. Global Sea to Sky Cargo ETF (SEA Quick QuoteSEA - Free Report)

This fund, with net assets worth $17.2 million, offers exposure to marine shipping, air freight and courier, and port and harbour operating companies. Okeanis Eco Tankers Corp holds the first spot in this fund, with 5.01% weightage, while DHT holds the second position with 4.94% weightage. INSW holds the eighth spot in this fund, with 3.94% weightage, while FRO holds the eleventh position with 3.89% weightage.

SEA has soared 41.8% year to date and charges 60 bps in fees. It traded at a volume of 0.01 million shares in the last trading session.