As military tensions rise in the Middle East, volatility in global oil prices has surged, drawing retail investor money into oil-linked financial products. Attention that had focused on stocks and crypto assets has rapidly shifted to the crude market, and speculative demand beyond simple asset allocation is stoking wild price swings. Some note the frenzy resembles the GameStop meme stock episode or the buying stampede seen in the gold and silver markets earlier this year.
On the 16th (local time), data compiled by Vanda Research, a U.S. commodities market analytics firm, showed retail investors recorded a net buy of $211 million (about 315 billion won) in oil ETFs in a single day on the 12th, setting a record high. ETFs are funds that can be bought and sold on an exchange like stocks. Funds that flowed into oil ETFs over the past five trading days topped $115 million (about 172 billion won), marking the steepest climb since the 2020 pandemic. The figure far outpaced gains in major assets such as gold and the Nasdaq over the same period.
In particular, options transaction activity linked to USO, the largest U.S. oil ETF, soared to an all-time record high by Bloomberg's tally. USO is a flagship financial product that tracks oil futures prices rather than physical crude. Trading volume in UCO options, a leveraged product that amplifies revenue and losses, also hit its highest level in four years. Experts said money is rushing into specific sectors such as ETFs and options, turning the crude market's very structure speculative.
West Texas Intermediate hovered around $67 per Barrel before military action toward Iran broke out, then spiked intraday to $120 on the 9th. After President Donald Trump mentioned the possibility of an early end to the war, the price retreated back to around $100, repeatedly surging and plunging. In the commodities market, concerns are mounting that Iran is weaponizing the Strait of Hormuz, through which 20% of the world's oil shipments pass, potentially prolonging a physical supply cutoff.
The Strait of Hormuz is the key route through which Middle Eastern oil producers export crude. If it is blocked, the global energy supply chain would be virtually paralyzed. As a result, sharp turbulence is continuing, with tens of billions of dollars changing hands on the back of political remarks unrelated to physical crude demand. The real threat of a supply chain paralysis is pushing up the value of physical assets, and as speculators seeking revenue opportunities pile into the market, the oil price discovery process is being distorted.
Financial experts said current crude market transaction behavior shows the classic characteristics of meme stocks. Meme stocks are shares that, after going viral on online communities, plunge or soar regardless of fundamentals. Viraj Patel, a global macro strategist at Vanda Research, pointed to the aggressive retail buying of oil ETFs and said, "Long crude positions have definitely become a new meme theme among retail investors."
A speculative environment has also formed that reacts more sensitively to online sentiment and one-off issues than to macroeconomic indicators. Macquarie Asset Management said the current rise in oil prices is following crowd psychology rather than market or company fundamentals. That day, Macquarie said, "Measures such as the release of strategic petroleum reserves by governments are only short-term stopgaps, and until true peace takes hold in the Middle East, the crude market will be exposed to extreme volatility like the GameStop episode."
The crude speculation frenzy does not stop on weekends and at night when regular exchanges are closed. Retail investors are even turning to crypto-based exchanges and prediction markets to keep trading. On decentralized exchanges such as Hyperliquid, tokenized oil futures contracts trade around the clock. In late February, during the initial U.S.-Israel airstrikes, oil futures contracts traded on Hyperliquid were around $20 million (about 2.99 billion won), but as of the 13th they exceeded $1 billion (about 1.49 trillion won).
Prediction markets such as Polymarket are also seeing a boom in bets worth tens of millions of dollars on the direction of oil prices. On social media such as TikTok, videos urging the purchase of oil ETFs under the banner of asset diversification have racked up millions of views, drawing in large numbers of young people. It is similar to when retail traders rallied in stock chatrooms to artificially push up specific stock prices.
In the investment industry, many warned it is risky if retail investors, without properly understanding the complex rollover structure of futures products, invest solely on vague expectations of revenue. Rollover is the essential process of replacing an expiring futures contract with the next month's contract. Even if Middle East tensions have real underpinnings in supply chain collapse during this process, the price bubble created by speculative demand can burst at any moment.
If the course of the war shifts rapidly or an unexpected diplomatic compromise emerges, a freefall without support levels could follow. In 2020, when oil prices fell into negative territory for the first time ever, retail investors who jumped into oil ETFs thinking it was a bottom-fishing opportunity suffered disasters, losing nearly 70% of their principal in just a few days.