Last Friday, the tanker industry experienced a 10% gain as investors were relieved that no disruption in the Suez Canal took place, but as tensions in Egypt escalate, a shutdown is becoming a greater possibility, writes Susan J. Aluise for InvestorPlace.
Since some 8% of global shipping moves through the Suez Canal choke point, a short-term blockage would redirect ships around South Africa, which would eat away at profit margins, but the high price of energy does allow tanker companies a little leeway to raise prices.
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Guggenheim Shipping (NYSEArca: SEA), the only pure-play shipping ETF, could get hurt if this happens, however, the impact may be only minimal if the shippers are able to pass along the extra costs of taking the roundabout route around Africa. iShares Dow Jones Transportation (NYSEArca: IYT) may be even less affected, given its diversified exposure not only to shippers, but domestic railroad companies and airlines.
Max Chen contributed to this article.