Oil’s war-driven volatility pulls in record retail money, fueling 'meme-style' trading
Oil prices slipped on Monday, after U.S. President Donald Trump called on other countries to help safeguard the Strait of Hormuz.
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The Iran war news flow-driven oil moves are drawing retail investors into the world’s most traded commodity, further fueling volatility.
Small investors have poured record sums into oil-linked exchange-traded funds in recent weeks as prices have whipsawed amid the Middle East conflict and fears of extended disruptions to crude flows through the Strait of Hormuz.
The rush has prompted some analysts to draw parallels with past retail trading frenzies in stocks such as GameStop or commodities such as silver, signaling that crude oil market could be exposed to “meme-style” trades.
“Oil is now definitely a retail ‘meme theme’. Retail investors have been piling into the major pure-play oil ETFs ever since the start of the Iran conflict,” said Viraj Patel, global macro strategist at Vanda Research.
Net retail buying of oil ETFs hit a record $211 million on March 12, surpassing the previous peak seen during the market turmoil in May 2020, according to data from Vanda Research.
Having hit a record $42 million on March 6, the popular United States Oil Fund, or USO, clocked its third best day for retail inflows at $32 million last Thursday.
The strategic reserves are not a permanent solution, of course, and crude oil will continue to trade like a ‘meme stock’ until the solution is peace.
The surge in retail participation comes as geopolitical tensions dominate oil markets, and especially as participation in oil markets has become easier, lowering barriers for individual investors.
Retail traders can gain exposure throughs ETFs such as the USO or the United States Brent Oil Fund (BNO), while smaller futures contracts have also made direct trading more accessible.
Traders have been closely watching the possibility of further supply disruptions, particularly as shipping through the Strait of Hormuz, a key chokepoint for global energy flows, has been effectively closed.
That uncertainty has made oil prices unusually volatile, drawing speculative interest from traders seeking to profit from rapid price swings, said market watchers.
GameStop, silver and now oil?
Tom Sosnoff, chief executive officer at financial technology platform Lossdog, noted that commodities are becoming the latest speculative playground for retail investors.
“Physical commodities like crude oil have become the speculative meme plays for 2026. First, it was silver and gold, and now it’s oil,” Sosnoff said.
“The markets love noise and volatility. The perception among retail traders is: where there is the most activity, there is the most opportunity.”
A meme trade is an asset that becomes popular with retail investors online, triggering rapid inflows and outsized price swings that may not always reflect underlying fundamentals.
Users on Reddit have been discussing buying oil ETFs to capitalize on the Iran conflict-driven rally, with traders boasting of quick profits and debating whether the surge still has “meat on the bone,” reminiscent of the speculation seen during previous meme-stock episodes.
Oil prices since the start of the year
Several experts highlighted that oil is different from equities that fueled previous meme-stock frenzies.
Saul Kavonic, energy analyst at MST Marquee, said the comparison to meme stocks likely reflects heightened volatility rather than retail investors dictating market direction.
“Given the scope for sudden escalations and also de-escalation, and varying rhetoric from warring parties that could suddenly indicate differing war trajectories, oil will trade with more erratic and enlarged price swings during the war,” he said. The Crude Oil Volatility Index has surged to its highest since 2020.
Other analysts said the influx of retail traders reflects a straightforward bet on supply disruptions.
Andy Lipow, president at Lipow Oil Associates, said many investors are responding to images of geopolitical turmoil and the potential for shortages.
Retail investors need to remember that trading crude oil is like playing musical chairs. When the music stops, it is not going to be pretty.
“Retail investors have been watching the news and see an oil supply disruption play out on TV with no clear end in sight. That presents these investors an opportunity to make some money anticipating further increases in price,” Lipow said.
However, unlike a meme stock, oil supply disruption is real and based on actual production shutdowns, Lipow highlighted, with the IEA estimating it at about 10 million barrels per day.
Analysts though warn that the same volatility attracting retail traders could quickly turn against them.
“Retail investors need to remember that trading crude oil is like playing musical chairs. When the music stops, it is not going to be pretty,” said Sosnoff.
Some institutional analysts said that crude’s behavior increasingly resembles that of speculative assets during periods of intense geopolitical stress.
Strategists at Macquarie said the current environment, marked by war risk, supply uncertainty and government intervention, could keep oil prices unusually volatile.
“The strategic reserves are not a permanent solution, of course, and crude oil will continue to trade like a ‘meme stock’ until the solution is peace,” the bank’s financial markets economist Thierry Wizman said.
