Industry Updates

Oil ETFs surge on rising geopolitical tensions

Israel airstrike is the latest event to push up oil prices

Lauren Gibbons

a silhouette of a person working on a power line

Oil exchange-traded commodities (ETCs) and ETFs that track the US energy sector have outpaced the S&P 500 this year following an increase in oil prices sparked by heightening geopolitical tensions including an Israeli airstrike in Syria.

A series of oil ETCs and energy ETFs have outperformed the S&P 500 in Q1 – including the $2.2bn WisdomTree Brent Crude Oil ETC (BRNT) – generating returns consistently over 13% while the flagship benchmark is up 8.8% in Q1.

The uptick in oil prices was accelerated after Israel conducted an airstrike on an Iranian embassy in Syria over the weekend, raising concerns the conflict could affect oil supply and subsequently push up prices.

Crunching supply further, a Ukrainian drone strike on a major Russian oil refinery is expected to significantly reduce Russia’s fuel exports, hitting a core unit that processes about 155,000 barrels per day of crude.

Furthermore, the extension of voluntary supply reductions by the Organisation of the Petroleum Exporting Countries (OPEC) in Q2 is anticipated to further put upward pressure on prices.

WTI rose to $84.8 per barrel on Tuesday, up 1.4%, while Brent Crude soared 1.3%, reaching $88.6 per barrel after hitting a high of $89.1 yesterday.

Following news of the airstrike, the $761m WisdomTree WTI Crude Oil ETP (CRUD) rose 2.5% yesterday. So far this year, CRUD has returned 15.5%.

In addition, BRNT was up 2.1% yesterday and has pulled in returns of 14.5% in Q1.

Rising crude and brent oil futures prices have lifted energy stocks including the $978m iShares S&P 500 Energy Sector UCITS ETF (IUES) which jumped 2.5% on Tuesday and have drawn in returns of 13.6% in 2024.

The $87m Invesco Energy S&P US Select Sector UCITS ETF (XLES) has also risen on rising geopolitical tensions, up 2.4% yesterday and 13.4% this year.

Following suit, the $593m SPDR S&P U.S. Energy Select Sector UCITS ETF (SXLE) rose 1.8% yesterday. SXLE has returned 13.5% in 2024.

Last July, oil ETCs posted their biggest outflows in over a year, led by investors pulling assets from BRNT in a bid to profit take after Brent Crude oil prices jumped 14.3% in one month last summer.

Featured in this article

Logo for InvescoLogo for WisdomTreeLogo for BlackRockLogo for State Street Global Advisors