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We remember the year 2018 for the raw rally. WTI gross ETF United States Oil (USO – Free Report) and Brent Brute ETF United States Brent Oil (BNO – Free Report) have gained about 25% this year. Reduced supplies, thanks to the agreement to cut OPEC production, and the crisis in Venezuela have initially pushed up prices. The imposition of sanctions on the Iranian energy sector from November by US President Donald Trump is expected to further reduce supply and lower prices.
While the strength of the oil price bodes well for a multitude of oil-producing countries, it is a factor of slowing down for oil-importing and consuming countries. Rising oil prices will weigh on GDP growth in these countries as imports become more expensive. This will lead to widening trade deficits, lower production and higher inflation for these countries.
In this regard, we have highlighted a few ETF countries that may experience difficult trading conditions in the coming months if the price of Brent oil rises or stays above $ 80 per barrel.
iShares India 50 ETF (INDY – Free report)
India depends almost entirely on imports for its oil needs. Already, the country has witnessed an increase in the oil import bill, thanks to the rise in world prices of crude oil. India's oil import bill jumped 52 percent to $ 11.83 billion in August. An increase in crude oil prices of $ 10 per barrel can push up inflation by almost 30 basis points and hinder growth by 10 basis points by Bloomberg.
Although the fundamentals of the Indian economy are quite strong at the moment, higher oil prices and a strong greenback could weigh on this fund in the near term. The fund follows the Nifty 50 index, which seeks to track the 50 largest publicly traded Indian companies (read: Are not Indian ETFs a favorite place for investment?).
iShares MSCI Turkey ETF (TUR – Free report)
Normally, 90% of Turkey's oil needs are met by imports. Iran is one of Turkey's largest exporters of crude oil. However, the country is trying to reduce its energy imports. For example, Turkey's energy imports decreased by 28.2% in 2016 compared to 2015.
Nevertheless, the country suffers from higher inflation. Its currency is under the pressure of the US dollar. The Turkish lira has been heavily abandoned by traders. In this context, an investment of USD 80 is a negative factor for investment in Turkey (read: Are the Times Ended for Emerging Market ETFs?).
iShares MSCI Japan ETF (EWJ – Free report)
Japan was the second largest net importer of fossil fuels in the world in 2012, after China. The Fukushima nuclear disaster in 2011 led the country to turn to oil and natural gas, for example, on eia.com. Japanese imports of liquefied petroleum gases from the United States have probably doubled in 2017. Thus, the country, although very stable from a monetary and economic point of view, could face some difficulties because of the soaring price of crude oil. .
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