5 Sector ETFs Benefiting From Russia-Ukraine Tensions

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5 Sector ETFs Benefiting From Russia-Ukraine Tensions

This story originally appeared on Zacks

US stocks rallied late last week despite the Russian invasion of Ukraine. Bargain hunting for depressed stocks amid geopolitical tensions fueled risk-on sentiment. In addition, according to some market analysts, Western sanctions against Russia were not as harsh as initially feared. There have also been reports that Russia is ready to negotiate with Ukraine even as Russian troops approach Ukraine’s capital, Kyiv.

– Zack

With that in mind, below we highlight five sector ETFs that have benefited from tensions between Russia and Ukraine.

defense

Any kind of warfare or military strike means increased purchase and use of weapons. The defense and aerospace industries benefit from this. Defense sector ETFs raised $126 million in the week ended Feb. 21, nearly doubling their previous year’s inflows, according to an article in the Financial Times.

The Verkhovna Rada of Ukraine on Wednesday passed a law increasing the revenue and expenditure parts of the 2022 state budget by UAH 26.5 billion. Of this, UAH 16 billion was allocated to the Ministry of Defense to increase the state’s defense capabilities and national security.

It’s been said that the operating environment for ETFs like aerospace and defense is pretty hot iShares US Aerospace & Defense ITA and SPDR S&P Aerospace & Defense ETF (XAR).

oil/energy

Russia is energetic. And Europe is heavily dependent on Russia for energy, importing about 40% of its energy needs. As tensions rise in Russia, gas prices in Europe – which rose to new highs last year – will continue to rise, according to Capital Economics, as quoted in a CNBC article. Russia supplies about 35% of Europe’s gas.

Oil crossed $100 for the first time since 2014. United States Brent Oil Fund, LP BNO rose 3.2% over the past week amid heightened tensions in Eastern Europe. Therefore, the energy sector may be considered for short-term gains if geopolitical tensions persist. Investors can try ETFslike for thisiShares US Oil Equipment & Services ETF (IEZ).

In any case, oil prices have been rising since early 2022. The uptrend in crude oil prices was triggered by a number of factors such as:

Clean energy

Clean energy stocks have rallied on the rise in fossil fuels. The sheer leap into the conventional energy sector made the prospects of the alternative energy sector lucrative. Finally, the cost of generating renewable energy has decreased in recent years as technological innovation has continued. Invesco Solar ETF TAN and WilderHill Clean Energy ETF (PBW) added 8.3% and 4.6% respectively last week.

Online Safety

With the Russian invasion of Ukraine and resulting Western sanctions against Russia making headlines, the opportunities for serious cybercrime on a global scale have come to the fore. Several Ukrainian government websites were offline as of February 23, 2022 as a result of a mass denial of service (DDoS) attack, a Ukrainian official said, as quoted in a CNBC article.

No wonder cybersecurity ETFs rallied late last week. Volt Cloud and Cybersecurity Disruption ETF (VCLO) andWisdomtree Cybersecurity Fund (WCBR) gained 3.1% and 3.9% respectively last week, while the S&P 500 Index gained 2.2%.

materials

Not only oil has been boosted by the crisis. The disruptive metal industry is also following suit. Ukraine is also a major producer of uranium, titanium, iron ore, steel and ammonia. And the country’s steel accounts for around 10% of European imports.

In any case, the solar industry (which requires the use of several disruptive metals) is thriving itself with upside potential. Titanium alloys are also commonly used in military applications (another area in high demand these days). This explains why disruptive metals companies have risen higher. Steel is the backbone of every civilization. Fears of supply chain problems in this segment caused material inventories to skyrocket.

VanEck Steel ETF SLX and SPDR S&P Metals & Mining ETF XME are two sectors that gained significantly last week.

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VanEck Steel ETF (SLX): ETF Research Reports

Invesco Solar ETF (TAN): ETF Research Reports

United States Brent Oil ETF (BNO): ETF Research Reports

SPDR S&P Metals & Mining ETF (XME): ETF Research Reports

iShares US Aerospace & Defense ETF (ITA) ETF Research Reports

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