The Iran war has triggered severe fluctuations in the global energy market, with retail investors flocking to bet on oil prices, turning the crude oil market into the latest investment venue after gold.
According to VandaTrack data, over the past five trading days, retail inflows into the United States Oil Fund (USO) reached a record $115 million, surpassing the historical peak seen at the beginning of the COVID-19 pandemic in 2020.
Meanwhile, Bloomberg data shows that options activity linked to USO surged to an all-time high this week, and options activity for the ProShares leveraged oil ETF (UCO) also reached a four-year high.
This wave of speculation reflects retail investors' strong preference for high-risk assets, but it has also raised concerns among market observers—during the similar buying frenzy when oil prices fell into negative territory in 2020, retail investors suffered significant losses, with USO declining by as much as 68% for the year.
<h2>War Shock Drives Oil Prices Soaring and Plummeting</h2>
The severe volatility in the crude oil market is directly triggered by the sharp escalation of the situation in the Middle East. According to the Financial Times, two weeks ago, the U.S. and Israel launched strikes against Iran, and the conflict has nearly completely disrupted energy flows through the Strait of Hormuz.
WTI crude oil futures surged from $67 per barrel before the war to nearly $120 on Monday, an increase of nearly 80%. Subsequently, Trump hinted that the war would be brief, causing oil prices to retreat, but they remain around $100 per barrel and continue to be highly volatile—as Iran continues to strike vessels passing through the Strait of Hormuz.
Due to supply shocks, the crude oil market is currently in a &#34;spot premium&#34; state, meaning that near-month contract prices are higher than those of later months, which is favorable for the USO fund holding futures. So far this year, USO has risen by 71%, slightly above the 67% increase in WTI spot prices.
<h2>Retail Investors Flock In, Record Funds Flow into USO</h2>
Viraj Patel, Deputy Research Director at VandaTrack, issued a warning last week, stating that there are &#34;early signs of a mini bubble forming among retail investors in the oil market,&#34; and noted that &#34;going long on oil may be becoming the next 'Meme theme' for retail investors.&#34;
This assessment is being confirmed by the data. The USO, which manages $2.7 billion, is the largest ETF in the crude oil market, and this week’s inflows have surpassed the historical peak seen at the beginning of the pandemic in 2020.
At the same time, retail participation channels are extending towards higher-risk avenues: the daily trading volume of tokenized crude oil futures on the crypto trading platform Hyperliquid surged from about $20 million two weeks ago to nearly $1 billion on Friday; prediction markets Polymarket and Kalshi have launched dozens of crude oil price event contracts, with one contract tracking crude oil price trends at the end of March attracting $31 million in bets.
On social media, TikTok users' enthusiasm for participation is also high. A blogger who usually posts emotional advice content stated in a video on Thursday: &#34;I am currently locking in USO... This is a way to hedge my portfolio and diversify my risk-return matrix.&#34;
<h2>The product mechanism is complex, and the risks for retail investors cannot be ignored</h2>
USO is managed by USCF Investments and does not directly hold crude oil, but instead provides price exposure by buying futures contracts linked to oil prices and rolling them over to contracts for later months before they expire.
This mechanism can create a persistent drag on fund performance when the oil market is in a &#34;contango&#34; state—where the prices of longer-dated contracts are higher than those of near-term contracts. The lessons from 2020 are particularly profound: at that time, oil prices fell into negative territory, and USO plummeted 68% for the year, resulting in significant losses for investors and prompting regulatory scrutiny over whether the fund's risk disclosures were adequate.
Todd Sohn, Chief ETF Strategist at Strategas, expressed concerns about the current enthusiasm for entry. &#34;This is a situation where everyone rushes in,&#34; he said. &#34;Someone mentions the code 'USO,' and everyone rushes in. They may not even understand how this product works because it’s futures... it’s almost like buying first and figuring out what they’re doing later.&#34;

The Iran conflict has triggered a speculative frenzy in the oil market, with $115 million of retail funds pouring into the United States Oil Fund (USO) in just five days, surpassing the peak during the pandemic in 2020; WTI crude oil soared from $67 to $120, and TikTok influencers are shouting "lock in USO." However, experts warn that during a similar wave in 2020, USO plummeted 68% over the year, and this meme-like celebration may repeat the same fate

- The ongoing conflict in Iran has led to significant fluctuations in the global energy market, prompting retail investors to flock to oil prices, transforming oil into a new investment landscape after gold.  
- Recently, retail investment in the United States Oil Fund (USO) surged to a record $115 million, surpassing the peak during the early COVID-19 pandemic, while options activity related to USO also reached unprecedented levels.  
- Concerns arise as retail investors may be entering a "mini bubble," with a complex product mechanism that could lead to significant risks, echoing the substantial losses experienced in 2020 when oil prices plummeted.

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After gold comes oil? Retail investors are speculating wildly, with record inflows into US oil ETFs