The United States Oil Fund LP (USO) experienced a sharp decline of 10.31% during post-market trading on Tuesday. The exchange-traded fund, which tracks the price of West Texas Intermediate crude oil, reversed its earlier gains as hopes for a diplomatic resolution to the Middle East conflict weighed on oil prices.
The sell-off followed President Donald Trump's announcement of a two-week ceasefire with Iran, contingent on Tehran agreeing to reopen the strategically vital Strait of Hormuz. This development, mediated by Pakistan, sparked optimism that the supply disruptions which have supported elevated oil prices might be alleviated, leading to a rapid unwind of bullish positions in crude futures and related ETFs like USO.
Brent crude futures also moved lower in post-settlement trading on the news, erasing gains that had been driven by geopolitical risks. The market's reaction highlights its acute sensitivity to any developments that could restore oil flows through the Strait of Hormuz, which handles approximately 20% of global seaborne oil exports.
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