Speaking of that near term, this is Iran we are talking about and let’s face facts — it has zero credibility in the face of the world. A lot can happen in six months. Iran can renege on its promises. Israel — who isn’t at all happy with the deal — could finally decide they’ve had enough and pursue a military strategy. Syria, Egypt and Libya are still hot beds of turmoil. The Middle East risk premium is still very much alive.
Meanwhile, Congress here at home has already begun discussing going around the deal and imposing harsher sanctions, if Iran doesn’t show any progress.
Snag Energy Stocks
The recent dip in energy stocks make the perfect buying opportunity for long-term investors.
While the previously mentioned XLE is a great fund, the iShares Global Energy (IXC) may be a better bet. The key is the fund’s global exposure. The exchange-traded fund (ETF) tracks 91 different oil stocks — with about 48% of its exposure to those energy firms located outside the United States.
While that does include Canada, the bulk of these holdings production is priced according to Brent crude benchmarks. Any “hiccups” in Iran’s willingness to comply with rules will benefit these firm’s more than, say, shale producer Range Resources (RRC). At the same time, the U.S.-based holdings in IXC represent some of the largest and globally diverse energy firms on the planet. They’ll pick-up plenty of Brent crude gains as well. Expenses for IXC run just 0.48% or $48 per $10,000 invested
A second play could be in the crude oil itself.
As we said before, the Iranian deal doesn’t actually add any new supplies back into marketplace for quite some time. With oil demand starting to move ahead as the global economy is beginning to return to normalcy, Brent prices should grind their way upwards. That makes the United States Brent Oil (BNO) a prime play.
The ETF tracks futures contracts on the international crude oil benchmark. Due to its close ties with Middle East production, BNO should provide a nice gain once the market returns to its senses and realizes what the agreement actually means. That is, if Iran sticks to the nuclear deal at all. If not, BNO should soar. Expenses for the ETF run 0.75%.
At first blush, the deal with Tehran may seem like terrible news for the energy sector. However, the news isn’t as bearish as it seems. For investors, the time to buy energy stocks is on. Both IXC and BNO are prime picks to play Brent’s rebound.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.