Oil ETFs, Aluminum Stocks Surge as U.S.-Iran Talks Collapse Spurs Commodity Volatility

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Following the breakdown of ceasefire negotiations between the United States and Iran, commodity-related exchange-traded funds (ETFs) and stocks have once again become highly volatile. The volatility in commodity stocks due to escalating tensions in the Middle East is expected to increase further for the time being.

According to ETF Check on April 14, oil-related ETFs surged across the board the previous day. TIGER Oil Futures Enhanced(H) ranked first overall with a return of 6.43%, while KODEX WTI Oil Futures(H) ranked second with a 6.14% return. Both products are currency-hedged ETFs that track U.S. West Texas Intermediate (WTI) oil futures prices.

For exchange-traded notes (ETNs), products investing in oil futures also recorded a sharp surge in returns. All of the top seven products by return the previous day were oil futures-related ETNs, with Samsung Bloomberg Leveraged WTI Oil Futures ETN B topping the list at 12.27%.

Since the outbreak of the war in the Middle East, oil-related ETFs have experienced repeated surges and plunges. For example, TIGER Oil Futures Enhanced(H) soared 26.93% on March 9 as oil prices rose in the early days of the conflict, but plummeted 13.87% the next day after U.S. President Donald Trump stated he would "bring the war with Iran to a quick end." More recently, after a Middle East ceasefire agreement was reached on April 8, it dropped 14.49% before rebounding 7.42% the following day.

As volatility increases, the disparity ratio—a metric indicating the gap between product price and net asset value (NAV)—has also been widening. A positive disparity ratio means the ETF or ETN is trading at a premium to its NAV, while a negative ratio indicates the product is trading at a discount. According to the Korea Exchange, among ETFs, KODEX WTI Oil Futures Inverse(H) posted the highest premium disparity ratio over the past month, climbing to 13.62% on April 8. For discount disparity ratios, KODEX WTI Oil Futures(H) recorded the largest negative disparity ratio at -16.09% on April 8. International oil prices fell below $100 per barrel intraday due to the Middle East ceasefire agreement, but ETFs failed to keep pace with these rapid changes.

Domestic oil distributors also saw gains across the board. Heungkuk Oil rose 4.60% from the previous session to close at 20,250 won, having soared to as high as 21,250 won soon after opening. Korea ANKOR Oil Fields (3.06%), Joongang Enervis (3.94%), and Korea Petroleum (5.25%) also recorded gains.

Aluminum-related stocks jumped sharply due to concerns over supply instability. Namsun Aluminum soared to the daily upper limit with a 29.93% rise, while Sam-A Aluminum (8.15%) and Joil Aluminum (26.62%) also finished higher. Middle Eastern countries produce 9% of the world's aluminum supply. On April 10, at the London Metal Exchange (LME), the three-month futures price of aluminum closed at $3,511.25, up 11.58% from February 27, the day before the outbreak of the Iran war.

As concerns over fertilizer supply chains grew, related stocks also climbed. Chobi (10.98%), Namhae Chemical (18.26%), Hyosung ONB (7.85%), and Nouveau (1.62%) all showed strength. Urea, a key raw material for nitrogen fertilizer, is a byproduct of natural gas, with about one-third of global production coming from the Middle East and exported through the Strait of Hormuz.

Experts have warned about the heightened volatility in commodities due to the Middle East situation and advised caution regarding the impact of roll-over (monthly contract rollover) costs when investing in futures ETFs. Hwang Byungjin, a researcher at NH Investment & Securities, said, "The schedule for additional negotiations between the United States and Iran remains uncertain, and short-term two-way volatility across the commodity market is inevitable." He added, "Whether shipping through the Strait of Hormuz normalizes will determine the stability of global oil supply-demand and the pace at which international oil prices stabilize downward."

Yook Donghwi, head of ETF Product Marketing at KB Asset Management, explained, "For ETFs tracking commodity futures prices, a difference between spot and futures prices can cause ETF investment results to diverge from expectations. Especially in a contango situation, where future prices are higher than current prices, roll-over costs due to price spreads can be significant and are reflected in ETF performance."

This content was produced with the assistance of AI translation services.