BWET ETF surges on tanker shipping gains amid US-Iran war

The Breakwave Tanker Shipping ETF (NYSE: BWET ), a relatively small fund with more than $83 million in assets under management, has emerged as one of the best-performing ETFs this year.

It has significantly outperformed popular funds such as the SPDR S&P 500 ETF (NYSE: SPY ) and Invesco QQQ ETF (NASDAQ: QQQ ), which have gained 14% and 19%, respectively.

BWET vs SPY and QQQ year-to-date performance BWET ETF has jumped by 1,600% this year, with its inflows rising by about $1.28 million since January.

This rebound happened because of the ongoing US-Iran war that has pushed shipping prices substantially higher.

The fund is designed to reflect the daily movements of indices that track the future cist of transporting crude oil.

Most of its constituent holdings are futures contracts that measure the prices of tankers moving from the Middle East to China.

These shipping costs have been rising because of the war.

Read Also: These Three Metrics Explain why the S&P 500 Index has Hit a Record High These contracts are settled against TD3C, a benchmark assessed daily by a panel of shipbrokers at the Baltic Exchange.

The benchmark typically prices voyages loading at Ras Tanura.

However, with traffic through the Strait of Hormuz effectively at a standstill, panelists have been using comparable voyages from ports outside the strait and adding a premium to reflect the heightened disruption and risk.

Tanker prices are also rising in other areas, including those moving from the Black Sea to the Mediterranean.

Higher tanker prices may continue in the foreseeable future since the US-Iran war has moved into a stalemate.

While fighting between the two countries has ended, no ceasefire has been announced, meaning that it may resume any time.

Also, Iran has continued to shoot tankers attempting to cross the Strait of Hormuz.

Additionally, freight insurance prices have jumped to a record high because of the underlying risk.

Also, there is a risk that Iran will start levying fees for ships crossing the Strait of Hormuz.

BWET ETF Has Become Overbought BWET ETF chart | Source: TradingView Technicals, however, show that the BWET ETF rally may be at risk of a reversal.

The Relative Strength Index (RSI) has jumped to an extremely overbought level of 82.

In some cases, assets tend to retreat when the indicator reaches these levels.

The ETF has also jumped significantly higher than the 50-day and 100-day moving averages.

This introduces the mean reversion risk, a situation where an asset retreats and moves back to the historical averages.

This retreat may happen as the US midterm elections near, which may push Trump to rush a deal with Iran.

Read Also: Trump Will ‘Never Apologize’ for Rising Gas Prices: ‘You’re at $4.

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