Energy Investments Wavering Amid Rising Tensions in the Middle East: A Guide to Global ETFs and Domestic Mutual Funds

Energy Sector Gains Attention Amid Geopolitical Tensions in West Asia

Key Figures:

• $78 per barrel: Brent crude oil price
• $70 per barrel: Pre-conflict crude oil price
• 20%: Global oil flows through the Strait of Hormuz
• 85%: India's import dependency on crude oil
• 50%: India's import dependency on liquefied natural gas (LNG)
• 65-70: Average Brent crude oil price in CY2026 if geopolitical tensions ease
• 5-15%: Recommended equity allocation to energy funds

Market Analysis:

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Rising tensions in West Asia have lifted crude oil prices and revived discussions around energy-linked investments as a hedge against global uncertainty. Crude oil prices have jumped to $78 per barrel from $70 per barrel in a few days amid fears of supply disruptions through the Strait of Hormuz, a route that handles over 20% of global oil flows. Ongoing uncertainty could keep prices elevated in the near term.

Investment Opportunities:

Energy prices typically spike when supply routes are threatened, boosting upstream oil and gas companies. Investors can access energy funds through:

1. Global Energy ETFs: Funds like the Vanguard Energy ETF or the Energy Select Sector SPDR Fund provide diversified exposure to oil and gas majors that tend to benefit when prices spike.
2. Domestic Mutual Funds: Energy-focused mutual funds like DSP Natural Resources and New Energy Fund have delivered strong one-year performance.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Risks and Considerations:

• Energy funds may work better as a tactical allocation rather than a core portfolio holding.
• Limiting exposure to 5-15% of equity allocation and investing gradually may help balance risk and opportunity.
• Experts caution against chasing short-term geopolitical rallies and recommend a more structural approach to investing.

Expert Opinions:

• Aditya Agrawal, CFA, Chief Investment Officer at Avisa Wealth Creators: "A more balanced strategy would combine energy exposure with gold, high-quality bonds, and some cash allocation."
• Niharika Tripathi, Head of Products and Research at Wealthy.in: "For retail portfolios, we prefer a more structural approach, maintaining strategic allocations to gold or precious metals as established hedges during periods of uncertainty."