In my February 12, 2026, Barchart article on crude oil prices, I concluded with the following:
Expect volatility in crude oil prices as increased production from Venezuela could be bearish, while the situation with Iran could turn explosive.
The situation in Iran did indeed turn explosive.
Brent and WTI crude oil futures soar
When the markets opened on Sunday evening, March 8, 2026, WTI and Brent crude oil prices soared, eclipsing the $100 level for the first time since July 2022, and reaching nearly $120 per barrel.
The monthly chart highlights the explosive move that took WTI crude oil futures to $119.48 per barrel before running out of upside steam and falling back just below $100.
Brent futures for May 2026 delivery rose to $119.40 per barrel in volatile trading, before falling to the $101 per on March 13.
Iran attacked neighboring countries, causing supply concerns in the oil market
On February 28, 2026, the U.S. and Israel attacked Iran, and as promised, Iran retaliated throughout the region, firing missiles at Israel and throughout the Middle East. The elimination of Ayatollah Ali Khamenei and many leaders increased hopes that the attack would inspire Iranians to replace theocracy with a more cooperative government that would abandon nuclear aspirations and end decades of support for terrorist activities in the region and worldwide. Iran’s regional retaliation drove crude oil prices higher throughout the week of March 2.
The daily continuous contract April NYMEX WTI futures chart shows that it closed at $67.02 per barrel on Friday, February 27, the day before the attack. NYMEX crude oil’s price rose 35.6% to $90.90 per barrel by the close on Friday, March 6. On Sunday, March 8, Iran announced its selection of the Ayatollah’s son, Mojtaba Khamenei, as its Supreme Leader, dashing hopes of a more moderate government, leading oil prices to spike 31.4% higher from the March 6 closing price to $119.48 per barrel before pulling back below the $100 level.
The daily continuous contract May Brent futures chart illustrates the 27.2% rally from $72.87 on February 27 to $92.69 on March 6, and the 287.8% spike to $119.40 on March 9 from the March 6 closing level before pulling back to just over $100 per barrel.
With virtually no traffic flowing through a critical petroleum chokepoint, crude oil prices soared when Iran announced it was digging in its heels and anointing Mojtaba Khamenei as supreme leader. While the U.S., Israel, and their allies have scored many military victories, Iran’s move that sent oil prices to nearly $120 per barrel is at least an economic victory that puts pressure on the U.S. administration. In response to the soaring oil price, President Trump said that higher short-term oil prices are a small price to pay for world peace.
Logistical chokepoints are warzones with Iranian proxies retaliating
The Strait of Hormuz is a narrow seaway through which almost one-third of the world’s crude oil flows. The Strait of Hormuz connects the Persian Gulf to the Gulf of Oman and the Arabian Sea, bordering Iran to the north, the UAE and Oman to the South. The lion’s share of crude oil moving through the Strait of Hormuz goes to Asian markets, including China, India, and South Korea. The Strait is not the only chokepoint for the energy commodity.
The global maritime oil trade accounts for 79.8 million barrels per day, or 76.5% of global oil consumption. Nearly 21 million barrels travel through the Strait of Hormuz, but 4.9 million and 4.2 million barrels travel through the Suez Canal and Bab el-Mandeb, locations where Iranian-backed proxies, such as the Houthis and others, can block or impede oil tankers. Crude oil spiked higher as Iranian attacks throughout the Middle East have increased supply fears.
The eventual bearish case for the energy commodity that powers the world
It appears Iran’s strategy is to disrupt the global oil market to inflict economic damage on the Trump administration as higher oil prices increase inflationary pressures. However, the attacks on neighbors in the Arab world could have the opposite impact.
In addition to Israel, Saudi Arabia, the UAE, Bahrain, Kuwait, Qatar, Iraq, Jordan, Oman, and Turkey have experienced retaliatory missile and drone attacks. The strikes have primarily targeted nations hosting U.S. military bases and infrastructure. While many of the Middle Eastern countries have publicly called for hostilities to cease, behind the scenes, the anger has likely caused them to increase cooperation with the United States in its quest to eliminate Iran’s theocracy, ending over four decades of hostilities.
The bottom line is that an eventual U.S. victory that leads to a more cooperative Iran could cause crude oil prices to drop, perhaps below $50 per barrel. Meanwhile, until that happens, there are other factors that could reduce crude oil prices, including:
- Coordinated strategic petroleum reserve releases.
- U.S. insurance of vessels and tankers transporting crude oil, fertilizers, and other critical commodities through the choke points.
- Military escorts of vessels and tankers transporting crude oil, fertilizers, and other critical commodities through the choke points.
- Continued strikes against the Iranian theocracy and infrastructure that render the country leaderless, causing defections and leading to an emerging new government acceptable to the U.S. and Middle Eastern neighbors.
- Iran has been a thorn in the side of many of its regional neighbors for decades. The current events provide an opportunity for Saudi Arabia and other countries to remove that thorn and, together with the U.S. administration, replace it with a more cooperative neighbor that will boost regional economic interests, thereby removing a significant risk premium.
While Iran has dug in its heels, its supporters, including Russia and China, have not yet given the country direct military support, leaving Iran alone to battle a rising and overwhelming military tidal wave. Therefore, I believe that oil prices will eventually decline, perhaps well below the pre-attack price level toward $50 per barrel or lower. However, further attacks on Middle East oil production and infrastructure, or on tankers transporting the energy commodity, could cause short-term, periodic price spikes.
Trading oil is optimal- UCO and SCO are trading tools
In the current environment, trading crude oil is optimal as the monthly historical volatility for NYMEX crude oil futures has increased from 22.77% in February to nearly 50% in March. The most direct routes for risk positions are the NYMEX WTI and ICE Brent futures markets, which serve as global price benchmarks. Futures and futures options are leveraged trading instruments.
The USO and BNO are unleveraged ETFs that track WTI and Brent futures prices, respectively. The UCO and SCO ETFs are double-leveraged bullish and bearish products that track the NYMEX WTI crude oil futures. The unleveraged and leveraged ETFs are liquid:
- At $117.50 per share, USO had over $1.565 billion in assets under management. USO trades an average of over 40.6 million shares per day and charges a 0.81% management fee.
- At $48.13 per share, BNO had over $195.4 million in assets under management. BNO trades an average of over 5.34 million shares per day and charges a 1.09% management fee.
- At $39.58 per share, UCO had over $719.25 million in assets under management. UCO trades an average of over 13.13 million shares per day and charges a 0.95% management fee.
- At $8.66 per share, SCO had $65.09 million in assets under management. SCO trades an average of over 19.1 million shares per day and charges a 0.95% management fee.
UCO and SCO are liquid trading tools for market participants seeking long and short risk to the volatile WTI crude oil market without venturing into the futures arena. However, the leverage comes at a price, as the gearing from options and swaps is subject to time decay. Therefore, trading WTI crude oil with UCO and SCO requires time and price stops to protect capital.
Meanwhile, all the ETFs, unleveraged and leveraged (USO, BNO, UCO, and SCO), only trade during U.S. stock market hours. They can miss highs or lows when the stock market is closed. On March 8/9, the high of $119.48 occurred before the stock market opened, and the high in WTI crude oil during U.S. stock market hours was only $104.57 per barrel.
I believe that crude oil prices will eventually head substantially lower. However, the current conflict could cause periodic price spikes. The Iranian theocracy’s strategy appears to be to inflict maximum economic damage to the U.S. administration. While they may have a few short-term victories, the odds favor an eventual resolution that includes lower oil prices. However, the price action is likely to be a wild ride until it gets there.
On the date of publication, Andrew Hecht did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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