Oil prices moved lower Tuesday after U.S. President Donald Trump said he had postponed a planned military strike on Iran, easing concerns over a potential escalation that could disrupt global crude supplies, as quoted on CNBC.
Trump said Monday that he had shelved plans for a “scheduled attack of Iran tomorrow” following requests from the leaders of Qatar, Saudi Arabia and the United Arab Emirates.
Prior to the remarks posted on Truth Social, there had been little public indication that Washington was preparing imminent military action against Iran, a move that would effectively end the fragile ceasefire reached on April 8.
According to Axios, Trump had been considering renewed military action after Tehran’s latest proposal in talks aimed at ending the conflict reportedly failed to meet expectations, as mentioned in the CNBC article.
Strait of Hormuz Risks Continue to Support Oil Prices
Analysts at ING said oil markets are still pricing in persistent supply disruptions in the Middle East, adding that hopes China could help broker progress during recent Trump-Xi discussions did not materialize, per the same CNBC article.
The firm noted that some shipping activity through the Strait of Hormuz has resumed, including several crude tankers and an Iraqi oil shipment headed to Vietnam. However, shipping flows remain well below normal levels and could deteriorate quickly if tensions rise again.
Sector ETFs to Gain
If oil prices continue to lose in the medium term, the below-mentioned ETF areas are likely to gain.
ETFs to Gain
Retail -- SPDR S&P Retail ETF (XRT)
Falling energy prices should benefit retailers, as consumers are likely to spend less on gasoline and other fuel-related expenses. Lower oil prices may also help cool overall inflation, boosting consumers’ purchasing power. Thus, XRT could benefit in a declining oil-price environment.
India -- iShares India 50 ETF INDY
India relies heavily on crude oil imports to meet its energy needs. A decline in oil prices could reduce import costs, improve macroeconomic stability and support domestic growth, putting INDY in focus.
Airlines -- U.S. Global Jets ETF JETS
The airline sector generally performs well when crude prices fall, as fuel costs account for a significant portion of operating expenses. Hence, airline-focused JETS could outperform in the current environment.
Gold Mining – VanEck Gold Miners ETF GDX
Gold mining is highly energy-intensive, with diesel and electricity accounting for a meaningful portion of operating costs. Lower oil prices can reduce mining and transportation expenses, potentially improving profit margins for miners. This could support gains in GDX.
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This article originally published on Zacks Investment Research (zacks.com).