Saudi oil attack: run for cover or invest in ‘black gold’?

Oil prices rose this week after an attack on Saudi Arabian production facilities sent supply down and spooked investors. Brent crude, the oil price measure traditionally used in Europe, rose by 15pc in one day – the largest spike on record.

Investors felt the effects when the share prices of a number of British companies reacted. There remains the potential for longer-term consequences.

Further attacks could lead to a higher long-term oil price. However, if proven to be a one-off, the oil price, and the share prices of any companies affected, should return to normal levels.

Investors in BP and Shell, two of the world’s largest oil producers, saw their shares react positively to the higher price of crude, as might be expected.

There were also other beneficiaries. Defence stocks performed well in the early part of the week in the belief that profits would rise if geopolitical tension caused by the attack led to sustained military action.

Government bonds and gold, two traditional safe haven assets, also rose thanks to geopolitical tensions and fears that a higher oil price would affect global economic growth.

Conversely, travel stocks fell. Airlines and Carnival, owner of P&O Cruises, bore the brunt. A rise in the oil price would mean higher costs for these businesses.

Their share prices recovered somewhat later in the week as the oil price slipped back to more normal levels.

However, the potential for a higher crude price has excited some investors’ interest in assets that track the value of “black gold”.

One option is exchange-traded funds (ETFs) that follow the oil price, such as ETFS Brent Crude. Other ETFs, such as Invesco Bloomberg Commodity, track a range of assets but have significant exposure to oil.

Specialist energy funds are another way; the largest is BlackRock World Energy. Broader funds such as Aberdeen Standard Investments UK Recovery also have high exposure to oil stocks.