The ongoing conflict between the U.S. and Iran in the Middle East is drawing attention to commodity-related investments. However, rather than expanding, the conflict appears to be stabilizing at a similar scale, limiting the performance of defense stocks.
As of September 9, the Korea Exchange reports that key commodity-related products, including crude oil exchange-traded notes (ETNs), are on the rise. The Meritz Securities West Texas Intermediate (WTI) crude oil futures ETN has increased by 27.70% over the past month. Other products, such as the Samsung Bloomberg WTI crude oil futures ETN and the Shinhan WTI crude oil futures ETN, have also risen by 20.44% and 19.86%, respectively.
The surge in crude oil ETNs is attributed to the prolonged nature of the U.S.-Iran conflict, which is lasting longer than initially expected. On the same day, U.S. forces attacked an Iranian small oil tanker near the island of Hargh, and the Islamic Revolutionary Guard Corps (IRGC) navy has warned of retaliation.
The overall rise in oil prices has also made refining stocks an attractive investment option. The destruction of refining facilities near the Strait of Hormuz has contributed to this trend. Consequently, refining margins—the profit made from processing crude oil into products—have significantly increased. Market expectations for refining margins in the second half of the year are projected to reach $30 per barrel, three times the $10 per barrel seen in the fourth quarter of last year, prior to the conflict.
Domestic refining companies have seen their stock prices soar, reflecting strong market optimism. SK Innovation and S-Oil have risen by 41.34% and 32.58%, respectively, compared to a month ago, while GS has increased by 23.58% during the same period. Securities firms are raising their target prices for refining stocks in response to the rising oil prices.
As the war continues, agricultural ETNs, including soybeans and corn, are also experiencing upward trends. The Meritz representative agricultural futures have risen by 13.58% compared to a month ago, while Shinhan soybean futures have increased by 11.7%. This is attributed to rising international oil prices, which have drawn attention to bioethanol as a potential substitute. With production expected to decline due to extreme heat in various regions of the Northern Hemisphere, increased demand is also a factor.
However, despite the prolonged conflict, the focus on defense stocks remains limited as the frontlines have not expanded. Leading defense companies, such as Hanwha Aerospace and LIG Defense and Aerospace, have seen their stock prices drop by 0.66% and 4.56%, respectively, over the past month. Hyundai Rotem has also fallen by 12.55% during the same period.
The demand for commodity-related securities is expected to continue in the near term due to the ongoing war. Samsung Securities stated, "There are no clear downward factors for oil prices, and upward pressure from inventory depletion is expected to persist. Saudi Arabia and the UAE's crude oil exports in August have plummeted to levels seen at the beginning of the war in March. Even if the Strait of Hormuz reopens and supply chains normalize, shortages of petroleum products will continue."
* This article has been translated by AI.
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