The Betashares Crude Oil Index Currency Hedged Complex ETF (ASX: OOO) has surged this month, up 18.4% since 30 May.
The OOO ETF is trading 1.85% lower at $5.85 per unit today.
The ASX ETF surged last Friday after Israel attacked Iran's nuclear facilities in a pre-emptive strike to prevent it from developing a bomb.
The OOO ETF spiked 7.8% on Friday alone, reflecting a surge in oil prices amid fears that a new war could directly impact global oil supplies.
The Brent crude oil price traded above US$76 per barrel on Friday, the highest level since February.
The US West Texas Intermediate crude oil price went to $75 per barrel, the highest price since January.
The key concern is that the conflict may block the Strait of Hormuz, a key route for about 20% of global oil flows.
The US is evacuating some personnel in the region after Iran threatened US military bases.
The Trump Administration has been trying to get a nuclear deal with Iran; however, Israel said it could not wait any longer to strike.
US President Trump leaving G7 early, Albanese meeting cancelled
We learned today that President Trump will leave the G7 meeting early due to the Israel-Iran conflict.
Israel has promised more air strikes on Iran. In the latest round of missile fire, Israel hit a state TV media building in Tehran.
On Truth Social, the US President warned residents of Tehran to evacuate, saying:
Iran should have signed the "deal" I told them to sign. What a shame, and waste of human life.
Simply stated, IRAN CAN NOT HAVE A NUCLEAR WEAPON. I said it over and over again!
Everyone should immediately evacuate Tehran!
President Trump's meeting with Australian Prime Minister Anthony Albanese has been cancelled as a result of him leaving early.
What's happening with oil prices today?
The Brent and WTI oil prices have retreated from their Friday highs amid hopes the Israel-Iran exchange will be short-lived.
The Brent Crude oil price is currently US$73.50 per barrel, up 0.37%. The WTI price is 71.94, up 0.23%.
Analysts at Trading Economics said Iran has been "urgently signaling that it seeks an end to hostilities and a resumption of negotiations over its nuclear program".
The analysts said this had eased concerns, with oil prices volatile yesterday and ultimately closing lower.
What's next for oil prices?
It's impossible to predict, and analysts have varied opinions right now.
According to The Guardian, Deutsche Bank is expecting oil prices to remain about US$75 per barrel.
But Deutsche said that in the worst-case scenario, oil prices could go to US$120 per barrel if the Strait of Hormuz was shut down.
Helima Croft, head of global commodity strategy at the investment bank RBC Capital Markets, said (courtesy The New York Times):
We see the risk of a serious supply outage increasing significantly in an extended war scenario.
Analysts at consultancy firm Rystad Energy said the conflict would likely be contained through US diplomatic intervention.
Rystad Energy expects oil prices to stay under US$80 per barrel if the Trump Administration can broker a deal.
Bachar El-Halabi, senior energy markets analyst at commodities research firm Argus Media, said oil prices were unlikely to jump.
As long as supply has not been disrupted, I don't think we are going to see huge jumps in oil prices, because the geopolitical risk premium is already factored in.
Betashares Crude Oil Index ETF soaring in June
Other factors have been propelling oil prices in June, which has contributed to the OOO ETF's 18% rise so far this month.
As we reported on Friday, oil prices were further boosted by falling US crude stocks, indicating higher-than-expected demand.
On 30 May, the Brent crude oil price was US$62.65 per barrel. Since then, it's risen 17%, and the OOO ETF has followed suit.
If you're interested in investing in the OOO ETF, here are the essential details you need to know.
OOO ETF essential details
The OOO ETF seeks to track the S&P GSCI Crude Oil Index Excess Return, hedged against AUD/USD currency movements.
It gives investors exposure to crude oil futures, not the spot price.
Betashares explains:
The performance of an ETF that is linked to oil futures may be materially different to the performance of the spot price of oil itself.
This is because the process of "rolling" from one futures contract to the next to maintain investment exposure can result in either a cost or benefit to OOO, affecting returns.
The ETF is fully invested in crude oil futures and 100% backed by cash held by a third-party custodian.
Betashares launched the OOO ETF in November 2011.
Since inception, its performance has been poor at negative 11.99% average annual returns.
Management fees are 0.69% per annum, with additional estimated indirect costs of 0.6% per annum.
