After Gold, Crude Oil? Retail Investors Go Wild on Speculation, U.S. Crude Oil ETF Inflows Hit Record

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Source: Wall Street Journal

Iran Conflict Sparks Speculative Frenzy in Oil Markets, $115 Million Retail Funds Flood into USO in Five Days, Surpassing Pandemic Peak in 2020; WTI Crude Rises from $67 to $120, TikTok Influencers Urge “Lock in USO.” However, experts warn: USO fell 68% in 2020 during similar waves, and this Meme-style frenzy could repeat.

Iran War Triggers Global Energy Market Turmoil, Retail Investors Rush to Bet on Oil Prices, Turning the Oil Market into the Latest Investment Arena after Gold.

According to VandaTrack data, over the past five trading days, retail funds flowing into the United States Oil Fund (USO) reached a record $115 million, surpassing the peak during early 2020 pandemic.

Meanwhile, Bloomberg reports that options activity linked to USO surged to all-time highs this week, with ProShares leveraged oil ETF (UCO) options also reaching four-year highs.

This speculative surge reflects retail investors’ strong preference for high-risk assets but also raises concerns—during the 2020 oil price crash into negative territory, retail investors suffered heavy losses in similar buying sprees, with USO declining 68% for the year.

War Impact Causes Oil Prices to Surge and Fall

The recent volatility in the oil market was directly triggered by the rapid escalation of Middle East tensions. The Financial Times reported Monday that two weeks ago, the US and Israel launched strikes on Iran, nearly halting energy flows through the Strait of Hormuz.

WTI crude futures soared from $67 per barrel before the conflict to nearly $120 on Monday, an increase of nearly 80%. Later, Trump suggested the war would be brief, causing prices to retreat, but they remain around $100 and highly volatile—Iran continues to target ships passing through the Strait of Hormuz.

Supply disruptions have caused the oil market to be in “spot premium” status, where near-month contracts trade above longer-term contracts, benefiting USO’s holdings. Since the start of the year, USO has gained 71%, slightly outperforming WTI’s 67% increase.

Retail Investors Flood In, Record Funds Pour into USO

VandaTrack Deputy Research Director Viraj Patel warned last week of “early signs of a retail mini-bubble” forming in the oil market, suggesting “longing oil may become the next ‘Meme theme’ for retail investors.”

Data confirms this. USO, with a management scale of $2.7 billion, is the largest oil ETF, with inflows surpassing the early 2020 pandemic peak.

Meanwhile, retail participation channels are shifting toward higher risk: tokenized oil futures on crypto platform Hyperliquid saw daily trading volume jump from about $20 million two weeks ago to nearly $1 billion on Friday; prediction markets Polymarket and Kalshi launched dozens of oil price event contracts, with one tracking oil prices at the end of March attracting $31 million in bets.

On social media, TikTok users are also highly engaged. A content creator who usually posts emotional advice said in a Thursday video, “I’m locking in USO now… it’s a way to hedge my portfolio and diversify risk-return.”

Complex Product Mechanics, Retail Risks Cannot Be Ignored

USO is managed by USCF Investments and does not hold physical oil directly. Instead, it provides exposure by buying futures contracts linked to oil prices and rolling them forward before expiration.

This mechanism tends to drag performance when the oil market is in “futures contango”—where longer-dated contracts are priced higher than near-term ones. The lesson from 2020 is especially vivid: when oil prices turned negative, USO plummeted 68%, causing heavy losses for investors and prompting regulatory scrutiny over the fund’s risk disclosures.

Strategas Chief ETF Strategist Todd Sohn expressed concern about current enthusiasm. “This is everyone rushing in at once,” he said. “When someone mentions ‘USO,’ everyone rushes to buy. They might not even understand how this product works because it’s futures… it’s almost buy first, figure out what you’re doing later.”

Risk Warning and Disclaimer

Markets carry risks; investments should be made cautiously. This article does not constitute personal investment advice and does not consider individual user’s specific investment goals, financial situation, or needs. Users should consider whether any opinions, views, or conclusions herein are suitable for their circumstances. Invest at your own risk.