Up 3,600%, this freight fund has posted the biggest gains of all on Iran war oil shock

The Breakwave Tanker Shipping ETF (BWET) is up over 3,600% year to date, according to Morningstar, by far the best performance of any non-levered U.S. fund as the price of transporting oil has soared due to geopolitical shocks.

Led by the U.S.-Iran war repercussions, there have been over 140,000 disrupted freight cargo vessels across the globe contributing to higher shipping rates.

Experts see no quick end in sight especially after the Houthis took control of another key Red Sea oil choke point last week, but any fund that goes up this much is also prone to swift and severe reversals.

As investors hunt for investment gains across the globe and diverse asset classes, from U.S. AI stocks to inflation hedges and crude oil contracts, something more mundane operating in the shadows of the global economy has racked up the biggest gains of all: freight tankers.

The Breakwave Tanker Shipping ETF (BWET), which tracks the price of shipping oil, is up roughly 3,600% year-to-date as of early September, according to Morningstar data through Sept. 11, making it the best-performing non-levered fund in the U.S., as the U.S.-Iran conflict squeezes tanker traffic through the Strait of Hormuz turning a once-obscure freight investment into one of Wall Street's best trades.

Supply chain and shipping routes will likely be further scrambled by Iran-backed Houthi rebels taking control of Yemen's key seaport of Mocka last week, a spot which allow the militia to wreak havoc with Red Sea shipping.

The Red Sea had been used as an "alternate" to the perilous Persian Gulf.

Further north on the peninsula, Saudi Arabian officials ordered a shut down of the kingdom's crucial East-West crude oil pipeline last week as a precautionary measure after multiple attacks by drones launched from Iraq.

John Murillo, chief business officer of B2BROKER, which offers trading infrastructure technology to financial institutions, said the most important detail about BWET is that it tracks the price of shipping oil, rather than underlying crude oil prices.

It is the only ETF to track the future cost of transporting crude oil, offering investors exposure to oil tanker futures without having to trade in the futures market directly.

"It has very little to do with the oil price itself or its actual volume and depends mainly on geopolitics," Murillo said.

Investors buying this fund are making a bet on how expensive it will be to move a barrel from the Middle East to consumers, he said, "and it became very expensive to do so after the crisis in the Strait of Hormuz began," he added.

Year over year, rates on the Middle East oil tanker routes it tracks are up close to 500%, according to BWET's most recent biweekly tanker report on Sept. 8.

As the hostilities continue, and difficulties persist passing through the Strait and the new choke points appear, many shipping companies have decided to avoid the region altogether, which makes trade routes longer and more expensive.

With supertanker rates at record highs, shipping companies are making record profits.

"This explains the fund's sheer growth and also points to the risk," Murillo said.