The Breakwave Tanker Shipping ETF (BWET) has delivered a staggering 1,720% return so far this year, making it the best-performing fund in the United States. This surge is directly tied to the sharp escalation in freight shipping rates, fueled by heightened geopolitical tensions between the US and Iran, as well as the ongoing Russia-Ukraine conflict.
While many investors have focused on the Schwab US Dividend ETF (SCHD), which recently hit a record high and is up 27% year-to-date, BWET's performance dwarfs that of traditional dividend and index funds. The fund's assets under management have climbed to $119 million, though its expense ratio stands at a hefty 3.50%.
How BWET Works
Unlike equity-based shipping funds, BWET does not invest in tanker companies. Instead, it uses freight futures contracts to track tanker shipping rates. The fund holds contracts with maturities ranging from one to six months, with a weighted average expiration of 60 to 90 days. Approximately 90% of these contracts are tied to Very Large Crude Carriers (VLCC), with the remainder in Suezmax-class vessels.
This structure allows BWET to directly benefit from rising spot rates. Over the past few months, shipping costs have soared, pushing a basket of 35 US and European-listed shipping stocks up by about 68% this year and 82% over the last 12 months.
Geopolitical Drivers
The latest spike in shipping rates came after Iran launched missiles and drones toward Kuwait, a key US ally, in retaliation for recent attacks. This has led to a significant drop in traffic through the Strait of Hormuz, which handles roughly 20% of global oil shipments. Many vessels are now trapped near the strait, and operators are hiking prices to reflect the heightened risk.
Meanwhile, the Russia-Ukraine war continues to disrupt shipping infrastructure, with both sides targeting key ports and vessels. Negotiations have failed, and the conflict shows no signs of abating, keeping supply-side pressures elevated.
Technical Outlook
From a technical perspective, BWET is trading near its all-time high, above all major moving averages and the Supertrend indicator. However, the daily chart reveals a potential double-top pattern, with resistance at $483 and a neckline at $336. A double-top is a classic bearish reversal signal, suggesting the fund could face downward pressure unless bulls push it decisively above $483. A breakout above that level could open the door to further gains toward $500.
Investors should note that BWET's performance is highly sensitive to geopolitical developments and freight rate volatility. While the current environment has been favorable, any de-escalation in tensions could lead to a sharp correction. For context, other market movements this week include futures staying flat as oil and yields ease, while Snowflake surged 22% on AI-driven growth. Additionally, treasury yields eased from multiyear highs as investors await jobs data.
This article is for informational purposes only and does not constitute financial advice.
