Rising tensions in the Strait of Hormuz are drawing attention to how the U.S. military could respond if Iran begins deploying naval mines in the region. Interestingly, the U.S. Navy has several systems designed to destroy these mines. Older Avenger-class minesweepers can locate and detonate mines using sonar, acoustic devices, and electromagnetic tools. In addition, new ships are equipped with systems that deploy unmanned surface and underwater vehicles, while MH-60S Seahawk helicopters use detection systems and small underwater vehicles to intercept mines from the air. For investors watching the defense sector, defense ETFs to consider are:
Meet Samuel – Your Personal Investing Prophet
- Start a conversation with TipRanks’ trusted, data-backed investment intelligence
- Ask Samuel about stocks, your portfolio, or the market and get instant, personalized insights in seconds
- iShares U.S. Aerospace & Defense ETF (ITA)
- SPDR S&P Aerospace & Defense ETF (XAR)
- Invesco Aerospace & Defense ETF (PPA)
Unsurprisingly, Iran’s Islamic Revolutionary Guard Corps Navy has long considered naval mines a key part of its strategy, according to a 2017 Office of Naval Intelligence report, and reports suggested that the country may have started placing mines in the waterway last week. However, Defense Secretary Pete Hegseth said in a Pentagon briefing that there is currently “no clear evidence” that mines have been deployed. Even so, the U.S. has already targeted Iran’s mine-related capabilities.
Admiral Brad Cooper, head of U.S. Central Command, said that American strikes destroyed storage bunkers for naval mines at Iran’s Kharg Island oil export hub. U.S. forces also destroyed 16 Iranian vessels that were believed to be capable of laying mines. According to a congressional report, Iran may have around 6,000 mines in its arsenal. These include limpet mines attached by divers, moored mines that float below the surface, bottom mines resting on the seabed, and drifting mines that float above the water and explode on contact.
Which Defense ETF Is the Better Buy?
Turning to Wall Street, out of the three ETFs mentioned above, analysts think that ITA has the most room to run. In fact, ITA’s price target of $271.90 per share implies 17.2% upside potential.
