The Iran war shut down the Strait of Hormuz in late February.
Brent crude oil went from around $70 a barrel to briefly over $120 in a matter of days
The SPDR S&P Oil & Gas Exploration & Production ETF (NYSEMKT: XOP) is up nearly 34% year to date over the same stretch, and soaring oil prices are the catalyst. Understand, however, that oil and explorers don’t see their stock prices correlate directly with oil. That’s because they’re corporations, not commodities, and they’ve likely hedged their oil price exposure months earlier But with even higher oil prices a distinct possibility, the environment for explorers and producers to translate those higher prices to the bottom line improves.
The International Energy Agency (IEA) has called this the “largest disruption in history.” The Iran war shows only on-and-off signs of reaching a resolution, and higher oil prices are not yet fully baked into this sector. That makes the State Street SPDR S&P Oil & Gas Exploration & Production ETF a buy. How XOP is constructed This ETF tracks the S&P Oil & Gas Exploration & Production Select Industry Index, which targets companies in the integrated oil and gas, exploration and production, and refining and marketing industries.