MW Individual investors are chasing oil's Iran conflict surge, institutions are thinking what comes next
By Joy Wiltermuth
In Europe, the 'bank and tank' theme still looks attractive, according to Seth Meyer at Janus Henderson Investors
Individual investors have gone big in chasing oil prices higher. Now, it's all about gauging what next comes out of the Iran conflict.
It's easy to boil down what mattered most to markets over the past two weeks: the price of oil, the blocked Strait of Hormuz and how long the Iran conflict might last.
Global oil prices climbed back up to $100 a barrel on Friday and stocks slumped, despite the Trump administration's decision to temporarily allow Russia to sell floating tankers of sanctioned crude into the market.
Now, it's all about how long the Persian Gulf crisis might carry on, and which areas of financial markets could come out stronger.
"I think what the market's trying to wrestle with is timing," said Seth Meyer, global head of client portfolio management at Janus Henderson Investors. "I'm not thinking about the next four days. I'm thinking about the next six months, the next year."
For individuals, the hot trade since the Iran conflict started has been buying the United States Oil Fund LP USO exchange-traded fund, a way to gain exposure to daily spot prices of light sweet U.S. crude.
Oil prices and the USO fund gained almost 46% since the Iran conflict began on Feb. 28, according to FactSet. That compares with a roughly 3.5% decline for the State Street SPDR S&P 500 ETF Trust SPY, a S&P 500 index SPX tracking fund.
The USO fund pulled in almost $1 billion from investors in the past nine trading days through March 12, whereas SPY was hit by $12.6 billion of outflows, according to FactSet data.
"Everybody is looking at that ticker for sure - especially in the equity market," said Paul Christopher, head of global investment strategy at the Wells Fargo Investment Institute, about crude futures.
Yet oil traders think crude will ease in the not-too-distant future, a view informed by lower prices on commodity contracts that expire months down the road. "My take is that the market is beginning to perhaps start to think this is going to be a fairly short-lived conflict," Christopher said Friday.
"We would be buying equities, here, on pullbacks and rebalancing out of the energy sector," he said. He also recommends putting that money back to work in sectors like utilities, financials and industries, areas that could still benefit from a growing economy and the AI boom.
Financials have been hit by private-credit jitters and rising Treasury yields. They were S&P 500's worst performing sector in the past week, falling 3.4%, while industrials shed 3.2% and utilities gained 0.4%, according to FactSet.
Wall Street tends to view geopolitical risks generally in terms of sharp, initial selloffs that quickly fade. But Iran's closure of the Strait of Hormuz, a crucial waterway that transports about a fifth of the world's oil supply and other critical global goods, is anything but ordinary.
See: The Iran war is already the biggest threat to global shipping and supply chains since COVID
"The economic outlook is increasingly shrouded in the fog of war," said Bob Schwartz, a senior economist at Oxford Economics, in a Friday client note. In addition to the oil spike, gasoline prices surged nearly 20% in the past two weeks, he said, "delivering an immediate hit to household budgets-particularly for lower-income families that devote a larger share of their spending to energy."
President Trump has been touting his continued bombing campaign against Iran on social media. But in a nod to nagging affordability issues at home and the looming midterm elections, Trump also signed two executive orders Friday afternoon designed to cut red tape for home buildings and to spur more mortgage lending.
This comes as the Federal Reserve's preferred inflation gauge on Friday pointed to more sticky price pressures. With the surge in energy costs in March, investors will be listening closely to Fed Chair Jerome Powell's press briefing due Wednesday afternoon for any comments about how inflation and the Iran conflict might influence the path of interest rates going forward.
The European Central Bank already has been weighing rate hikes if the conflict in the Gulf pushes inflation higher. Increased rates could slow the region's economies. The U.S. is an oil exporter, but could still face inflation pressures and uncertainty around the rate backdrop this year. All that's evident in the 10-year Treasury yields BX:TMUBMUSD10Y sharp rise.
"But the fundamental reasons we are bullish Europe is two things," said Meyer at Janus. "It's banks and tanks. That's it."
Europe has been focused on deregulating its banking system and spending in the industrial space, which has been influenced by defense, he said. "The bank and tank theme, we don't think that changes in Europe."
The S&P 500 fell 1.6% in the past week, the Dow Jones Industrial Average DJIA shed 2% and the Nasdaq Composite Index COMP retreated by 1.3%.
-Joy Wiltermuth
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March 15, 2026 12:00 ET (16:00 GMT)
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