The Oil Chokepoint That Could Unwind USO’s 98% Rally in the Next 12 Months

The United States Oil Fund (NYSEARCA:USO) has been the most consequential commodity trade of 2026, and the next 12 months will decide whether that trade survives or unwinds. USO trades near $131 on May 27, up roughly 98% year to date and more than double its level a year ago, driven almost entirely by the de facto closure of the Strait of Hormuz that began on February 28. USO holders are betting on whether that strait reopens, and how fast.

USO is a single-commodity fund that holds near-month WTI crude futures and rolls them forward each month. It owns paper barrels only, with no exposure to producers, refiners, or pipelines. That mechanical purity is why USO tracked WTI almost tick for tick on the way up: NAV rose 83% in Q1 2026 against a 77% rise in the benchmark, and Q1 net income hit $983.7 million versus $40.3 million a year earlier.

The macro factor: when Hormuz traffic returns

Roughly 20% of global oil supply moved through the Strait of Hormuz before the shutdown. The EIA’s May Short-Term Energy Outlook expects global inventories to draw by 8.5 million barrels per day in Q2 2026, keeping Brent around $106 in May and June, then falling to $89 in Q4 2026 and $79 in 2027 as Middle East flows resume. On April 8, when President Trump signaled a conditional pause in strikes on Iran, crude plunged 13% to 17% in a single session, showing how fast the premium can evaporate.

The single number to track is commercial transit volume through Hormuz. Kpler analyst Ana Subasic put crossings at 10% of pre-war levels in mid-April even as political rhetoric claimed the strait was open. Bloomberg’s tanker tracking, Kpler’s weekly flow data, and the EIA’s monthly STEO are the three sources worth bookmarking. A move from 10% toward 50% of normal traffic, combined with EIA confirmation, signals the supply shock is unwinding. GasBuddy’s Patrick De Haan estimates 78 weeks, or roughly until November 2027 for full inventory recovery once flows resume, so the unwind will be gradual, but the futures market will price it in days.

The fund-specific factor: the futures curve

USO’s edge right now is roll yield. With Brent spot near $117 and the EIA forecasting $89 by Q4, the WTI curve is in steep backwardation. Each month USO sells an expiring contract at a higher price and buys the next month cheaper, adding to NAV before spot even moves. That mechanic helped NAV outperform the benchmark by more than six points in Q1.

That tailwind reverses if Hormuz reopens. A normalized curve typically slips into contango, and USO would then pay up each month to roll forward, bleeding NAV even on flat spot prices. The CME WTI futures strip, published daily, shows this first. Watch the spread between the front-month and six-month WTI contract. While the front trades at a premium of several dollars, USO collects roll yield. When that spread narrows to zero or flips negative, the structural support disappears. An analyst forecast from late April noted that quick Hormuz normalization could push WTI to $75 within weeks, amplified by a curve flip.

Investors wanting oil exposure without futures-roll mechanics should consider the Energy Select Sector SPDR Fund (NYSEARCA:XLE | XLE Price Prediction), which offers equity exposure to producers and refiners and decouples from the front-month contract.

What to watch

Two signals matter. Weekly Kpler and Bloomberg tanker data showing Hormuz transit volumes climbing back toward normal will tell you the geopolitical premium is unwinding before the EIA confirms it. A flattening or flip in the WTI futures curve, visible on the CME strip, will tell you USO’s roll-yield tailwind has turned into a headwind. Either signal warrants a hard look at position size. Both together would mark the end of the trade that built USO’s 2026.