The Breakwave Tanker Shipping ETF (BWET) has emerged as the best-performing non-levered fund in the U.S., reflecting a staggering 3,600% increase year-to-date as of early September, according to Morningstar data. This surge is largely attributed to the ongoing U.S.-Iran conflict, which has severely disrupted tanker traffic through the Strait of Hormuz, a critical shipping lane for oil.
The situation has been exacerbated by the recent takeover of Yemen's key seaport by Iran-backed Houthi rebels, further complicating shipping routes in the Red Sea. Additionally, Saudi Arabia's precautionary shutdown of its East-West crude oil pipeline due to drone attacks has added to the volatility in the region.
John Murillo, chief business officer of B2BROKER, emphasized that BWET tracks the price of shipping oil rather than crude oil prices, making it a unique investment vehicle that reflects the rising costs of transporting oil amidst geopolitical tensions.
Rates for Middle Eastern oil tanker routes have surged nearly 500% year-over-year, leading many shipping companies to avoid the region, resulting in longer and more expensive trade routes. This has allowed shipping companies to achieve record profits, although it also introduces significant risks.
Kyle Peacock, principal at Peacock Tariff Consulting, noted that the current boom in freight trade is not solely due to the Iran conflict; it is also influenced by tariffs and environmental factors, such as droughts affecting port operations. The urgency in the market has shifted the dynamics of shipping routes, with companies now prioritizing profitability over traditional routing practices.
While the current high rates are expected to persist, Peacock anticipates that relief will come in the form of new vessels entering the market in the next 18 to 36 months.
Eric Fullerton, vice president of product marketing at Project44, pointed out that disruptions in trade routes have become increasingly common, with geopolitical tensions leading to a significant rise in shipping disruptions this year.
The implications of these developments extend beyond the tanker trade, affecting inflation and the broader global economy, as the costs of essential goods and materials rise. Investors seeking exposure to these trends may consider diversified options such as the U.S.
Global Sea to Sky Cargo ETF (SEA) or the SonicShares Global Shipping ETF (BOAT), which provide broader access to the shipping sector without the concentrated risk associated with tanker futures