Has oil become a "meme stock"? Private investors have broken pricing in the crude market

The oil market during the war in Iran has acquired pronounced speculative features, and the dynamics of trading in securities of specialized funds and high-risk oil derivatives began to resemble the behavior of "meme" stocks, writes MarketWatch. The excitement among retail investors fueled quotes and helped market volatility reach its highest level since the spring of 2020.

Non-professional investors began to aggressively build positions in oil-focused popular exchange-traded funds - net inflows into the basket of the largest sector ETFs for the month reached a record $154 million since Ma 2020, MarketWatch quotes data from Vanda Research. Buying has been particularly active over the past week, with the largest U.S. oil ETF, the United States Oil Fund, recording record daily inflows. Retail traders are pouring money not only into the securities of funds that benefit from rising oil prices, but also into leveraged inverse exchange-traded notes (ETNs) - high-risk products for extracting multiple profits from falling prices, the research company said.

The inflow of speculative liquidity increased the amplitude of price fluctuations, and their movement began to resemble the unpredictable behavior of securities popular on social networks. According to Yahoo Finance, the "fear index" for the oil market rose above 120 points by the close of trading on March 11 in the United States - the highest level since April 29, 2020.

"When this whirlwind of retail investors rush into the market and start actively speculating, it amplifies the swings not only in ETFs, but in the exchange-traded commodities themselves," noted Mike Treacy, head of market risk at Apex Fintech Solutions. "That's exactly what happened with silver just a few months ago," he recalled.

Despite the decision by member countries of the U.S.-led International Energy Agency (IEA) to dump a record 400 million barrels of oil into the market from reserves, the strategically important commodity will "trade like a meme stock" until peace is restored in the Persian Gulf, Macquarie strategist Thierry Wiseman told MarketWatch.

"Ultimately, all that matters is the strait," agreed Seth Meyer, director of client portfolios at Janus Henderson Investors. He said markets could be held hostage to increased demand for oil volatility trading until the Iran-blocked Strait of Hormuz opens. "It's turned into [event betting platform] Polymarket, where the prevailing mindset is, 'I want to trade everything,'" the expert added.

This article was AI-translated and verified by a human editor