Buy This ETF Before the Empty Oil Tankers Reach U.S. Shores

Three supertankers slipped through the Strait of Hormuz last Saturday, each carrying up to two million barrels of oil. That trickle is all that passed during the ceasefire window. Before the war began, more than 100 vessels made the trip daily. The gap between those two numbers is what is causing spot oil prices to be at nearly $130. The futures oil prices may be down, but spot prices (the price you need to pay to get oil right now) remain extremely high.

United States Oil Fund (NYSEARCA:USO) gives equity investors direct exposure to crude oil through front-month WTI futures contracts. It holds paper claims on oil that has not yet been delivered, rolling those contracts forward every month. That distinction matters enormously. It does hold futures, but the futures are very near-term.

What USO Actually Does

USO was launched in April 2006 and manages ~$2.6 billion in net assets with an expense ratio of 0.83%. The fund pays no dividend. Its entire return engine is capital appreciation tied to near-month WTI futures on NYMEX.

The portfolio role is simple: tactical energy exposure without owning oil company equities. An investor wanting to express a view on crude prices directly, without the earnings risk or management noise of an Exxon (NYSE:XOM | XOM Price Prediction) or Chevron (NYSE:CVX), reaches for USO. It is a trading vehicle first, a long-term holding second.

The Geopolitical Backdrop

The 2026 Iran war began on February 28 when the U.S. and Israel struck Iran. Iran effectively shut the Strait of Hormuz, through which ~20% of global oil supplies had been flowing.

A two-week ceasefire was agreed on April 8, temporarily allowing tanker traffic and briefly cooling prices. Peace talks collapsed in Islamabad over the weekend, with Vice President Vance citing Iran’s refusal to commit to non-nuclear-weapon development. Trump responded by ordering a U.S. Navy blockade on Iranian ports, effective Monday, April 13.

Trump’s tone has softened since, suggesting talks could resume within days. Oil markets noticed: benchmark prices slipped below $100 per barrel on Tuesday as diplomatic signals calmed sentiment. But spot prices remain historically elevated, and the ceasefire has only a week left to run.

Does USO Deliver on Its Promise?

Over the past year, USO has risen ~86%, closely tracking WTI’s surge. Year to date, the fund is up ~79%. In a supply-shock environment where futures curves are in backwardation (near-month contracts priced above later-dated ones), USO performs well because the monthly roll generates a small gain rather than a loss.

The longer view tells a different story. Over ten years, USO has returned just ~51%, despite oil prices cycling through multiple booms and busts. That gap is explained almost entirely by contango drag, the mechanical cost of selling expiring contracts and buying more expensive later-dated ones in a normal market. Over time, those small losses compound into meaningful underperformance versus spot oil.

Three Tradeoffs Before You Buy

1. Roll yield erosion in normal markets. When the Hormuz crisis fades, and futures curves normalize into contango, USO’s monthly roll becomes a recurring drag. The five-year gain of ~186% looks strong because this period captured a historic supply shock. In calmer conditions, that number compresses significantly.
2. Tax complexity via K-1 filing. USO is structured as a limited partnership, not a standard ETF. Investors receive a Schedule K-1 at tax time rather than a simple 1099. K-1s arrive late and require additional handling that many retail brokerage accounts are not set up to manage cleanly.
3. Volatility concentrated around diplomacy. USO dropped ~10% in a single week when ceasefire headlines hit. The fund’s near-term price action is driven by geopolitical news flow rather than supply-demand fundamentals, making position sizing and risk management difficult for anyone without a high tolerance for headline-driven swings.

USO is structured as a short-to-medium-term tactical vehicle for direct crude exposure without the equity layer. Investors holding it long-term should understand that the fund’s structural mechanics work against them once the crisis premium fades.