The Strait of Hormuz Is Open: Time to Buy Airline Stocks?
Think about how individual airline stocks might fit into your portfolio rather than what might happen to oil prices.
The Strait of Hormuz Is Open: Time to Buy Airline Stocks?
Overview
Last week, the U.S. and Iran signed a memorandum of understanding (MOU), and tankers began to travel through the vital Strait of Hormuz once more. However, the situation remains fluid: By the end of the week, there were mixed reports about restrictions on transit through the vital waterway. The MOU is the beginning of a 60-day negotiation period, rather than a full peace deal.
WTI crude prices have fallen by more than 20% over the past month to around $75 (as of June 22). That's up from $57 at the start of the year, but significantly down from almost $113 in April. The challenge for investors is that reopening the Strait is not a linear process from geopolitical and logistical perspectives. It will take time, and there may be further moves to restrict tanker movements if violence restarts.
Details
When major geopolitical shifts occur, it is natural to consider which sectors might become more or less attractive. High jet fuel prices certainly pressured airline stocks at the start of the conflict, but markets have already started to price in an end to the war. Indeed, the U.S. Global Jets ETF (NYSEMKT: JETS), which tracks the global airline industry, is trading higher than when the war started. Not only has air travel demand proven remarkably resilient, but traders are already looking beyond the conflict.
Source
Originally published at www.fool.com.
