Let’s Get This Strait: Ignore Energy Prices at Your Own Peril (and 3 ETFs to Buy Now)

The market’s obsession with the “no-brainer” aspects of AI is back. If you build it, they will come. Just spend whatever is three digits higher than a trillion dollars: “a quadrillion” (he said, after looking it up). Spend all that money and return on investment (ROI) will not only be delivered… it will arrive on time to silence the naysayers. Maybe even sooner!

Maybe that will be our future, maybe not. 

Either way, we win from the standpoint of what AI can do to bring efficiency and insight to our lives like we never imagined. There are well-documented downsides, too. But as a native-born skeptic, I can’t help but think it seems too easy. Maybe because I managed money through the dot-com bubble. 

I am rooting for great things, ever-high S&P 500 Index ($SPX) levels, low interest rates, and a new puppy for everyone who wants one. But then, there’s this other thing. The Strait of Hormuz, and the underrated dent it may have already put in the global economy. 

The bottom line is that I still think the price of oil is not done trying to steal Christmas. So while the fast lanes of AI, semiconductors, IPOs, and the next tech breakout are again front and center in the macroeconomic discussion, I think there’s still something we have to get Strait.

This is the chart of BNO (BNO), which tracks the price of Brent crude oil (CBM26). While volatility like we’ve seen is historically disruptive to charting methods as well as commodity markets, this is a breakout. Even if the stock market doesn’t seem to care as of Wednesday’s close. 

The International Energy Agency (IEA) has officially termed the events of April to be the largest supply disruption in history. The closure of the Strait of Hormuz back in March wasn’t just a headline. It was a structural break in the world’s circulatory system. 

And that’s not an issue easily dismissed. During earnings season, perhaps. But after that, when the stock market is looking for something new to fixate on? That’s when I think we’ll see that energy price direction and level will be the big focus.

The numbers coming out of the Middle East right now are staggering. Before the February strikes and subsequent blockade, roughly 21 million barrels of oil and 20% of the world’s liquid natural gas flowed through that narrow strip of water every day. By March 10, production from Saudi Arabia, Iraq, and the UAE collectively dropped by about one-third of that total, to around 14.3 million. 

Brent crude, which many hoped would stabilize in the $70s this year, is now averaging $105/bbl for Q2, with spot prices having spiked past $120 during the most acute phase of the blockade. They closed just below $112 Wednesday in the U.S.

For tankers lucky enough to find a path, rerouting around the Cape of Good Hope adds roughly 14 days of transit time. We live in a modern world of just-in-time supply chains. You know what two weeks is? Too late! And that translates to higher costs at every gas pump and plastic factory on earth.

The most dangerous part of this ongoing crisis isn’t just the price of a gallon of gas. It is what happens 12 months from now. For an example of a genie that can’t just be put back in the bottle, the Strait is a primary exit for chemical and fertilizer exports. Now, the World Bank is projecting a 31% increase in fertilizer costs for 2026. If farmers can’t afford to fertilize today, we face a global food supply hangover in 2027. 

This is why the Federal Reserve and the European Central Bank have suddenly turned hawkish again, postponing the interest rate cuts everyone was betting on back in January. And on Wednesday, outgoing Fed Chair Jerome Powell also delivered a more hawkish message than many expected. 

In a market defined by geopolitical blocks and supply shocks, the winners are those who own the one thing the world can’t live without: Power.

ETFs That Could Soon Matter a Lot 

While energy-related ETFs tend to correlate highly with each other, every investor has their preferences, biases, and comfort zone. So if you’re thinking the market will eventually say, like a dramatic movie scene, “this isn’t over between you and me,” here are three energy-related ETFs to try to play that.

First is the ProShares K-1 Free Crude Oil ETF (OILK), and like BNO above, it just broke out again. The political football situation with the Iran War aside, we’ve already seen how fiercely this can rally. And while I’m usually not a card-carrying member of the “chase that ETF higher” club, this is not really about technicals. It is about the denouement in the Middle East.

Second is the Global X MLP & Energy Infrastructure ETF (MLPX). MLPX is not the first master limited partnership (MLP) ETF most people think of. But it is distinguished from others in that group because it limits its exposure to pure MLPs to 25%. That makes it more tax-efficient, as it bypasses the corporate tax burden bestowed on investors.

As with OILK above, which has its own “no-K1” tax advantage, MLPX’s chart exhibits a positive sign when it comes to the percentage price oscillator (PPO) indicator at bottom. It just crossed over to the upside. If you look at similar formations in the chart, this has historically produced some decent trading gains.

Finally, for the more adventurous energy player, there’s the iShares US Oil & Gas Exploration & Production ETF (IEO). It owns exploration and production stocks, the ones with some kick to them. Or bite, on the downside. This is the most speculative aspect of the energy business. 

Transporters like those held in MLPX do not have a comparable level of risk of “dry holes” in drilling, or chaotic oil prices. They just transport the stuff. 

The Strait of Hormuz went from being an unfamiliar topic to front and center in market news.  

And even if investors are temporarily in a “squirrel!” moment, with their minds refocused on our AI-powered future and the next Fed chair, the energy market is sending a warning. “I’m still right here. Ignore me at your peril.”

Yes, it’s still about energy prices. And the inflation fears they are still likely to produce in time.

Rob Isbitts created the ROAR Score, based on his 40+ years of technical analysis experience. ROAR helps DIY investors manage risk and create their own portfolios. For Rob’s written research, check out ETFYourself.com.