The year 2026 can easily be tagged as a year of U.S.-Iran war. The war started in the first quarter of 2026 and has still been running despite rounds of ceasefire efforts. Last weekend’s airstrikes were the fourth time the United States has bombed Iran over the past week in retaliation for attacks on commercial ships transiting Hormuz in the southern corridor protected by the U.S. military, as quoted on CNBC.
On July 13, 2026, President Trump said the United States would reimpose its blockade of the Strait of Hormuz and begin charging a 20% fee on any cargo shipped through the vital waterway, further complicating an already delicate scenario in the Middle East.
No wonder, renewed Middle East tensions boosted the price of United States Brent Oil Fund LP BNO by 13.5% last week.United States Oil Fund LP USO also gained about 11.5% in the same time period.
Why the Move?
The recent surge in oil prices following escalating tensions in the Middle East region has aided the fund. The trajectory from here hinges on how long the disruption lasts, when the situation normalizes fully and how much physical damage occurs to the energy infrastructure.
With some damage already done to the energy infrastructure in the Middle East, oil prices are less likely to return to pre-war levels. Against this backdrop, master limited partnerships (MLPs) are likely to benefit.
We’ll tell you why.
Lure of Dividends
MLPs are known for their high-yielding nature as they do not pay taxes at the entity level and can thus pay out most of their income (more than 90%) in the form of dividends, such as the REIT firms.
While most traditional income asset classes produced minuscule yields, MLPs lured investors with their higher payouts. The MLP segment yields 8.38% annually versus 1.35% dividend yield offered by the S&P 500.
Note that most of the MLP ETFs offer treasury-beating yields. Even if these ETFs end up witnessing capital losses, a higher yield would protect their portfolio to a large extent.
MLPs Are Undervalued Than the S&P 500
Forward price/earnings ratio of MLP stands at 13.57X (versus 18.45X possessed by the S&P 500) (at the time of writing). Price/Sales ratio of the MLP segment stands almost in line with the S&P 500. The segment trades at a P/S multiple of 3.49X (versus 3.14X possessed by the S&P 500).
War-led Jump in Oil Prices
Although oil prices fell over the past month on ceasefire hopes, the full-fledged U.S.-Iran truce seems unlikely at the current level. If oil prices remain high, energy MLPs should look up.
MLPs Are More Immune to Oil Prices Than Other Energy ETFs
Midstream MLPs own and operate infrastructure assets, such as pipelines and storage facilities, used to transport, process, and store oil, natural gas and natural gas liquids.Stocks belonging to midstream MLPs have lower exposure to volatility in the underlying commodity prices.
This is because midstream players generate stable fee-based revenues since the transportation and storage assets are being booked by shippers for the long term. Thus, their business model is relatively low-risk, signifying considerably lower exposure to both oil and gas price and volume risks.
ETF Choices
Below, we highlight a few MLP ETFs that were in the green in the past month and have decent dividend yields.
InfraCap MLP ETF AMZA – Up 5.8% Past Month; Up 17.3% YTD; Yields 8.01% annually
Alerian MLP ETF AMLP – Up 4.8% Past Month; Up 11.1% YTD; Yields 7.63% annually
NEOS MLP & Energy Infrastructure High Income ETF MLPI – Up 0.9% Past Month; Up 9.8% YTD; Yields 8.46% annually
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United States Oil ETF (USO): ETF Research Reports
Alerian MLP ETF (AMLP): ETF Research Reports
United States Brent Oil ETF (BNO): ETF Research Reports
InfraCap MLP ETF (AMZA): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).