U.S.-Iran Deal to Reopen Hormuz Could Lift EM ETFs

Reports indicate the United States, Iran and third parties are discussing an agreement to resume commercial traffic through the Strait of Hormuz. Market participants have priced the prospect of resumed shipping, which would ease a major supply bottleneck for crude oil and refined products.

The Strait of Hormuz links the Persian Gulf to the Gulf of Oman and is a key corridor for global oil and liquefied natural gas shipments. Past disruptions there have raised shipping costs, insurance rates and regional fuel prices.

Many emerging-market economies import a large share of their energy. Higher fuel and shipping costs have weighed on growth and corporate earnings in those countries. Reduced transit risk and steadier deliveries could lower regional fuel prices and ease cost pressure for firms with energy-dependent operations.

Exchange-traded funds focused on emerging markets provide one way for investors to gain exposure to those economies. Goldman Sachs Asset Management offers funds including the Goldman Sachs ActiveBeta Emerging Markets Equity ETF, ticker GEM, and GSEE. GEM follows a multifactor index that screens for momentum, value, quality and low volatility, and it carries a 35‑basis‑point expense ratio.

Over the past 12 months GEM returned 51.8%, compared with a 38.1% average for the broader emerging-markets ETF category. The fund’s price has recently traded above both its 50-day and 200-day simple moving averages, indicators some traders use to assess momentum.

Before the escalation of tensions, investors were increasing allocations to ex-U.S. equities for valuation and diversification reasons. Volatility tied to the conflict interrupted those flows. An agreement that restores transit through the Strait of Hormuz would reduce a prominent geopolitical risk for energy markets and may influence demand for funds targeting fuel-importing emerging economies.