Oil ETFs Gain Renewed Attention on Israel-Iran Conflict
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Oil prices and oil ETFs spiked sharply on Friday following a surprise Israeli airstrike on Iran, raising fears of a broader regional conflict that could disrupt global energy supplies.
West Texas Intermediate (WTI) crude, the U.S. oil benchmark, surged as much as 14% overnight before paring gains. By midday, prices were up around 7%, trading near $72.50—a level not seen since January. Brent crude, the global benchmark, also jumped 7% to roughly $74 per barrel, its highest since April.
Oil ETFs Flip to Green
The rally propelled oil-related ETFs higher. The United States Oil Fund (USO), which tracks WTI futures, and the United States Brent Oil Fund (BNO), which tracks Brent futures, each rose 7% on the day. Both funds flipped into positive territory for the year, up about 6% year to date after Friday’s move.
The sharp rebound comes just weeks after oil prices slumped. WTI briefly dipped below $57 in May amid expectations of weakening demand and growing supplies. While the fundamental supply-demand outlook hasn’t meaningfully changed, geopolitical risks have taken center stage.
Israel’s overnight strike did not damage Iran’s oil infrastructure, but Israeli officials warned that more attacks are likely in the days ahead. That has markets on edge about the possibility of future damage to Iran’s facilities—or retaliatory strikes by Iran on key oil-producing neighbors like Saudi Arabia.
There are also fears Iran could target infrastructure elsewhere in the region or attempt to disrupt shipping through the Strait of Hormuz, a critical chokepoint for global oil transport. An estimated 20 million barrels of oil per day—about 20% of global supply—flows through the strait.
XLE Gets a Lift
Energy stocks also got a lift from the rally. The Energy Select Sector SPDR Fund (XLE) rose just over 1% Friday, bringing its year-to-date gain to around 3%.
As the geopolitical situation evolves, oil and energy ETFs like USO, BNO and XLE are likely to remain in the spotlight, serving as vehicles for investors looking to trade or hedge around the volatility in energy markets.