Country ETF Winners and Losers as Oil Prices Rise

Various economies and country-related exchange traded funds could react differently as we see a rebound in crude oil prices.

Major oil producers will enjoy a reprieve in their energy-induced sell-off, but large consumers may find their wallets a little lighter after paying for higher energy costs.

“If sustained, higher oil prices would reduce the gains in consumer real income and spending that we currently forecast,” Adam Slater, a senior economist at Oxford Economics, said on CNBC. “And also risk blunting the boost to investment that we forecast based on reduced business costs.”

If Brent crude oil averaged $70 per barrel over the next two years, compared to the previous baseline forecast of $59.5 this year and $65.9 in 2016, Slater calculates that the overall economy could expand 2.7% this year and 2.8% this year.

However, looking at individual economies, growth may vary. For instance, the biggest winners of higher energy prices would include major exporters like Gulf nations, Russia and Malaysia.

For Gulf country investments, the Market Vectors Gulf States Index ETF (NYSEArca: MES) and WisdomTree Middle East Dividend Fund (NasdaqGM: GULF) provide broad exposure to the region. MES includes UAE 37.2%, Qatar 23.9%, Kuwait 21.1% and Oman 7.9%. GULF includes Qatar 33.9%, UAE 39.4%, Kuwait 15.4%, Morocco 6.3%, Egypt 6.0%, Oman 4.4%, Bahrain 2.6% and Jordan 2.1%.

Alternatively, investors can now focus on the United Arab Emirates or Qatar through the iShares MSCI UAE Capped ETF (NasdaqGM: UAE) and the iShares MSCI Qatar Capped ETF (NasdaqGM: QAT).

The Market Vectors Russia ETF (NYSEArca: RSX), iShares MSCI Russia Capped ETF (NYSEArca: ERUS) and SPDR S&P Russia ETF (NYSEArca: RBL) all provide broad exposure to Russia’s markets. The Russia ETFs are also heavily weighted toward oil giants. For instance, RSX includes 8.3% Gazprom and 7.8% Lukoil, which make up part of the ETF’s 43.5% tilt toward the energy sector. [Russia Economy, ETFs on the Mend]