Ron Day
2 min read
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ETFs covering Middle East countries, including Israel and Saudi Arabia, climbed for a second day on hopes that U.S. military strikes on Iranian nuclear facilities may create a more peaceful region and boost the nations’ economies.
Funds that also hold Qatar and United Arab Emirates equities moved higher after a fragile truce between Israel and Iran appears to hold for now. The truce came after U.S. bombers hit Iran’s nuclear facilities early Sunday morning. The raids appear to have set back Iran’s nuclear program, while questions remain on whether or not the country retains access to its enriched uranium and if it can rapidly bring centrifuges back online.
The $661.2 million iShares MSCI Saudi Arabia ETF (KSA) jumped 1.7% Tuesday for its second-straight increase. The $274.6 million iShares MSCI Israel ETF (EIS) added 2.7% for another day of gains as well.
The performance of exchange-traded funds that hold shares of Middle East countries has been mixed this year, with KSA dropping 7.6% through Monday, while EIS added 17%. Nations in the oil-rich region are attempting to transition into financial and real estate hubs while still fighting religious insurgencies, corruption and outright war between Israel and Iranian proxy militias Hamas and Hezbollah.
The gains follow President Trump's announcement Monday evening that Iran and Israel had agreed to a cease-fire. The agreement, which both sides accuse the other of violating, came after the U.S. bombed Iranian nuclear sites.
Iran had been censured by a U.N. nuclear agency for failing to comply with non-proliferation obligations, and some say the bombings may have improved the region’s economic outlook by removing the specter of a nuclear-armed Iran.
“It does seem like the temperature of tensions can be turned down,” Brian Jacobsen, chief economist at Brookfield, Wisconsin-based Annex Wealth Management, said in an email. “That might not mean peace, but it should mean a resumption of growth.”
Middle East ETFs through June 23—Source: FactSet data
KSA, with net inflows of $108.5 million this year through June 23, is mostly allocated to financial firms. Its largest holding is Al Rajhi Bank and the world’s largest oil exporter, Saudi Aramco, is its No. 2 holding. EIS, mostly holding financial services, pharmaceuticals and tech companies, added 0.7%.
The $128.4 million iShares MSCI UAE ETF (UAE) added 3.6%. That fund, 11% higher this year through Monday, is more than half allocated to financial services, and its top holding is Emaar Properties. The $74.7 million iShares MSCI Qatar ETF (QAT) closed 1.6% higher. That fund is mostly invested in stocks of banking companies, with Qatar National Bank being its top holding.
