Iran Goes To The Polls: Three ETFs To Watch

by on June 12, 2009 | ETFs Mentioned:

Millions of Iranians headed to local polling places on Friday to participate in the most heated presidential race since the founding of the Islamic Republic 30 years ago. The passions of Iranians surrounding this election have been evidenced by numerous (mostly peaceful) rallies and demonstrations spilling into the streets throughout the country in recent days. Three candidates are challenging incumbent Mahmoud Ahmadinejad, with Mir Hossein Mousavi, the former prime minister, emerging as the primary competitor. Results will likely begin to leak as early as Saturday morning, although official results won’t be available until that evening at the earliest. If no candidate captures more than 50% of the vote, there will be a June 19 run-off between the top two vote getters.

Mousavi is a stark contrast to the hardline Ahmadinejad, promising to seek improved relations with the U.S. and soften Iran’s global image. He’s even floated the idea of a world consortium overseeing uranium enrichment in Iran. Ahmadinejad, on the other hand, views uranium enrichment and Iran’s pursuit of a nuclear program as a nonnegotiable “right.” While the most interested observers will be in Washington, Wall Street is likely to keep a close eye on the elections as well. Here’s a look at three ETFs that could be on the move as the results are reported:

  • iPath S&P GSCI Crude Oil Total Return Index (OIL): Iran, one of OPEC’s founding members, holds approximately 136 billion barrels of proven oil reserves, representing the third largest supply in the world and approximately 10% of worldwide reserves. As oil prices are frequently impacted by escalations in geopolitical tensions, election of a leader viewed as more open to international cooperation may reduce volatility in prices.
  • Van Eck Market Vector Russia ETF Trust (RSX): At more than 900 trillion cubic feet, Iran’s proven natural gas reserves are second to only Russia. A more stable and integrated Iran could allay fears of existing and potential natural gas customers and weaken Russia’s control over prices in certain regions. The oil and gas industry accounts for nearly 40% of the index tracked by RSX.
  • iShares Don Jones U.S. Aerospace & Defense Fund (ITA): As the Obama administration has sought to distance itself from Bush policies, a war with Iran is much less likely than it was a year or two ago. But given Ahmadinejad’s anti-U.S. views, commitment to pursuing a nuclear program, and volatile personality, such a conflict is certainly within the realm of possibility. Although there is no certainty as to how Mousavi’s foreign policies would actually play out, he pledged during the campaign to improve U.S. relations, indicating that a conflict would be less likely.