The United States Oil Fund LP (USO) experienced a sharp decline of 7.66% during the after-hours trading session 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 reports that Pakistan had urged Iran to reopen the strategically vital Strait of Hormuz, raising expectations that the critical oil transit route could soon resume normal operations. This development 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 associated with the U.S.-Iran conflict and a looming deadline set by former President Trump. 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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