USO Stock Jumps 4.5% as Hormuz Crisis Rattles Crude Traders — What Comes Next?

Watching USO trade on a day when the Strait of Hormuz makes headlines has an almost hypnotic quality. One of those days was Monday. Volume surpassed 15 million shares, the fund surged 4.55% to close at $121.32, and anyone with a commodities watchlist had the ticker blinking green before Wall Street opened. Every trader who had been shorting oil during the previous Friday’s ceasefire rally spent Monday morning discreetly reversing, with West Texas Intermediate settling at about $89.61 and Brent at $95.48.

Despite what everyone says, USO isn’t actually a stock. Launched in 2006, the United States Oil Fund is an exchange-traded fund (ETF) that holds short-term NYMEX futures contracts linked to WTI. It has an expense ratio of 0.70%, is run by USCF Investments, and has a history of acting strangely during geopolitical upheavals. When you purchase USO, you are actually purchasing the front month of the WTI curve in addition to whatever backwardation or contango the futures market is experiencing that week. The majority of retail traders don’t realize how important that technical distinction is. Because of this, USO can perform exceptionally well during a brief oil spike and then suffer silent losses for months when futures curves move against it.

It’s doing the former at the moment. The 52-week range—$61.75 at the low in May 2025, $143.98 at the high on April 7, and $121.32 today—tells the tale. Over 67% is the YTD total return. A year at almost 77%. These figures are typically found in small-cap biotech companies rather than commodities funds. Crude prices were essentially reset by the Iran war, which started on February 28 when Hormuz was first disrupted. In early March, Brent came close to $120. Since then, it has settled into a $90–$100 range, with occasional headline spikes due to trade threats between Tehran and Washington.

Some truly bizarre positioning has resulted from that volatility. A widely shared Reddit post on r/oil back in late March revealed a 716% increase in USO short volume, from about 21 million shares short in February to over 171 million by mid-March. According to reports, 67% of the fund’s outstanding shares were subject to short interest. In typical markets, that type of reading is uncommon. The mechanics were unusual, whether you interpret it as a bet that the ceasefire would last, institutional hedging of actual barrels, or just a crowded trade on the wrong side of geopolitics. At least some of those shorts were caught offside by Monday’s move. As this develops, it seems that USO is now more of a sentiment indicator for investors’ feelings regarding the upcoming Truth Social post than an oil proxy.

The discomfort is reinforced by the fundamentals, as they are. Over the weekend, Energy Secretary Chris Wright told reporters that it might take until well into next year for gas prices to return to $3 per gallon. The next day, he was publicly contradicted by President Trump. According to AAA and DOE data, the average American SUV driver now spends roughly $58.83 more each month at the pump than they did on February 28. Before Kevin Warsh’s confirmation hearing, those are the kinds of figures that begin to seep into CPI prints, complicating every Fed rate-cut calculation. In other words, oil is no longer simply oil. It is feeding straight into the macro.

A few warnings should be noted by anyone considering USO as a position instead of a ticker. Morningstar’s long-run NAV return since 2006 is approximately negative 7% annualized, which serves as a reminder that USO is a trading tool rather than a set-and-forget investment. The fund deteriorates over extended holding periods due to futures roll costs; this is well-documented. The structural drag is real, but the expense ratio isn’t harsh. The way commodities desks have always viewed USO—as a quick, flexible means of communicating a tactical perspective on crude over weeks or months rather than years—is the correct way to think about it.

The trade is currently taking place. This week, U.S. negotiators are scheduled to meet with Iran in Pakistan. A ceasefire lasts for a few days. Iranian infrastructure is under threat from the White House. At $121, USO is neither close to the spring floor nor the April peak. The next headline might push it back toward $140. It’s also possible that one good diplomatic move will cause it to drop to $100 overnight. There is little doubt that this fund will continue to be used for each tanker that turns around in the Gulf of Oman during the coming weeks.