The Breakwave Tanker Shipping ETF (BWET) has become one of the standout momentum plays in the energy market, surging to an all-time high as disruptions across key oil shipping routes push up the cost and risk of transporting crude.
BWET jumped 11.42% on Thursday to close at $650. The move extended the fund's powerful run. BWET has gained roughly 44% in the past five trading sessions through Thursday.
The rally comes as shipping through the Strait of Hormuz, one of the world's most important energy chokepoints, remains severely disrupted. Vessel transits through the strait fell to just seven on Sept. 10, compared with a 10-day average of 15 and a pre-war daily average of around 125, according to preliminary ship-tracking data cited by Reuters.
Why BWET is Benefiting
BWET offers a more targeted way to play the shipping disruption than conventional oil ETFs.
The fund seeks to track the daily price movements of indices measuring the future cost of transporting crude oil. Its portfolio consists of freight futures with maturities ranging from one to six months, with a weighted average expiration of 60 to 90 days.
Importantly, 90% of BWET's exposure is to TD3C futures, which represent very large crude carriers, or VLCCs, transporting oil from the Middle East Gulf to China. The remaining 10% is allocated to TD20 Suezmax futures, covering the West Africa-to-Europe route.
That makes the ETF particularly sensitive to changes in tanker freight rates.
The current geopolitical environment has created several forces that can tighten tanker markets. Shipowners face higher war-risk premiums, increased insurance costs and greater operational risks when moving through affected waterways.
An Emirates National Oil Company executive told Reuters that insurance costs can now account for as much as 6% of a cargo's value, while total transit costs through Hormuz have risen to between $10 million and $20 million in some cases.
Red Sea Risks Add to the Shipping Squeeze
The risk is not limited to Hormuz.
In the Red Sea, Iran-aligned Houthis seized Yemen's Mocha port, raising concerns about further disruption around the Bab el-Mandeb Strait, another critical maritime chokepoint. Around 7% of global oil output passes through Bab el-Mandeb, according to Reuters.
Longer routes, security concerns and reduced vessel availability can all push up freight costs. For an ETF whose underlying exposure is directly tied to tanker freight futures, that creates a potentially powerful tailwind.
Can BWET keep rising?
Momentum remains exceptionally strong. The fund has gained over 5,000% since its May 2023 launch. Moreover, it has experienced significant volatility over the past year, with its 52-week range spanning from a low of $13.58 to a high of $693.60, indicating a remarkable rebound from its lows.
But the move also highlights the risks.
BWET charges a 3.50% expense ratio, considerably higher than most traditional equity or broad-based commodity ETFs. The fund can also be highly volatile because it is exposed to tanker freight futures rather than the underlying price of crude oil.
Still, as long as disruptions keep vessels away from key routes and freight markets remain tight, BWET could continue to attract momentum investors looking for a direct play on the shipping fallout.
For now, the ETF is proving that investors do not necessarily have to bet on higher oil prices to benefit from an energy supply shock. They can bet on the cost of moving the oil instead.
