To The Moon

Driven by escalating tensions in the Middle East, global oil prices rose sharply on March 9. Brent crude briefly climbed to about $119 per barrel, significantly higher than the roughly $72 level before the war, while WTI crude rose to around $102 per barrel, both reaching their highest levels since 2022.

Year-to-date gains for energy-related ETFs have also been notable amid the rise in oil prices. $Energy Select Sector SPDR Fund(XLE)$ has gained 26.53% this year, $Vanguard Energy ETF(VDE)$ 26.76%, $Spdr S&P Oil & Gas Exploration & Production Etf(XOP)$ 29.99%, $iShares U.S. Oil & Gas Exploration & Production ETF(IEO)$ 27.80%, and $Invesco DB Oil Fund(DBO)$ 49.67%. The crude oil futures–tracking ETF $United States Oil Fund LP(USO)$ has surged 57.27% year to date, while the two-times leveraged oil ETF $ProShares Ultra Bloomberg Crude Oil(UCO)$ has risen the most, up 73.81%, significantly outperforming traditional energy equity ETFs.

On March 9, Iran’s Assembly of Experts announced that Mojtaba Khamenei, the 56-year-old son of the late Supreme Leader Ali Khamenei, would assume the position of Supreme Leader. Analysts noted that this appointment suggests Iran will maintain a hardline policy stance, making a near-term easing of the conflict unlikely and reinforcing market expectations that the war could become prolonged.

On the same day, Iran’s Islamic Revolutionary Guard Corps issued a warning through state media, stating that if neighboring countries continue assisting US and Israeli military operations, Iran may strike oil facilities in Gulf states. An IRGC spokesperson said, “If you can tolerate oil prices above $200 per barrel, then continue this game.” The statement quickly intensified market concerns over potential disruptions to global energy supplies.

As oil prices surged, the G7 held emergency discussions on March 9 regarding a coordinated release of strategic petroleum reserves. The meeting was convened by France, the current rotating G7 presidency, with participation from the United States, the United Kingdom, Germany, Italy, Japan, and Canada. Officials indicated that the plan under discussion could involve releasing roughly 300 million to 400 million barrels of reserves to ease supply pressures caused by the conflict.

US President Donald Trump also addressed the spike in oil prices on the same day through a post on Truth Social, stating that oil prices above $100 were “a very small price to pay for safety and peace.” He added that prices would fall rapidly once the Iranian nuclear threat had been eliminated. Markets generally interpreted the statement as a signal that the US was unlikely to alter the pace of military operations in the near term.

Before the escalation on March 9, energy supply disruptions had already begun to emerge in the region. With shipping through the Strait of Hormuz affected, Kuwait and the United Arab Emirates had begun reducing portions of their crude output, while Iraq shut in some oil wells and suspended parts of its export loading operations. Markets worried that prolonged transport disruptions could force several million barrels per day of Middle Eastern supply offline.

Looking back at the beginning of the current rally, the conflict initially escalated in early March when the United States and Israel launched airstrikes on Iranian targets, hitting military and energy-related facilities in and around Tehran. As the war intensified and energy infrastructure across the Gulf region came under repeated threats, oil prices quickly surged from around $70 per barrel to above $100.

Amid the dual shock of war and supply disruptions, global financial markets experienced notable volatility. As oil prices soared, capital rapidly moved out of risk assets. Overseas investors withdrew about $14.2 billion from Asian stock markets excluding China last week, while the US dollar and energy equities emerged as major safe-haven destinations.

Markets generally believe that the future trajectory of oil prices will depend largely on how long the conflict lasts and whether shipping through the Strait of Hormuz resumes. If supply disruptions across the Gulf region persist, global energy markets could face further upward pressure on prices.

ETF recommendations:

$Energy Select Sector SPDR Fund(XLE)$ has total assets of approximately $39.29 billion and charges a management fee of 0.03%. The ETF tracks the S&P Energy Select Sector Index and primarily holds major US energy companies such as Exxon Mobil and Chevron, making it the largest energy sector ETF in the market.

$Vanguard Energy ETF(VDE)$ manages about $9.74 billion in assets and charges a management fee of 0.08%. It tracks the CRSP US Energy Index and covers a broad range of companies across the US energy industry. With 113 holdings, it provides wider diversification than XLE.

$Spdr S&P Oil & Gas Exploration & Production Etf(XOP)$ has total assets of roughly $3.15 billion and an expense ratio of 0.35%. The ETF uses an equal-weighted approach to invest in US oil and gas exploration and production companies, giving higher exposure to shale producers and mid-sized energy firms.

$VanEck Oil Services ETF(OIH)$ manages about $2.44 billion in assets with a management fee of 0.35%. The fund focuses on oilfield equipment and services companies such as Schlumberger and Halliburton, serving as a key ETF reflecting the oil services sector.

$United States Oil Fund LP(USO)$ has total assets of approximately $2.02 billion and charges a management fee of 0.45%. The ETF tracks oil prices by holding WTI crude oil futures contracts and is one of the most widely known funds for direct exposure to crude oil.

$ProShares Ultra Bloomberg Crude Oil(UCO)$ manages about $631 million in assets and charges a management fee of 0.95%. The fund uses futures and derivatives to deliver approximately two times the daily return of WTI crude oil, resulting in higher volatility and making it more suitable for short-term trading.

$Invesco DB Oil Fund(DBO)$ has total assets of roughly $371 million with a management fee of 0.75%. The ETF also invests in crude oil futures but uses an optimized rolling strategy designed to reduce losses caused by futures contango, giving it a distinctive structure among commodity ETFs.