Hormuz Under Fire: USO Surges to Record Highs, but Will the War Premium Outlast the War of Words?
Shares of USO, the biggest oil-tracking exchange-traded fund, hit an all-time high of $169.54 last week — a total return of 140% in the past year — as the deadliest month for shipping in the Strait of Hormuz since the U.S.-Iran war began sent crude prices to levels not seen since 2022. The question now: with Trump simultaneously threatening new strikes and ruling them out before the midterms, can USO holders trust a rally built almost entirely on fear?
Record Attacks Are Reshaping the World's Most Important Oil Chokepoint. "October has seen the highest number of ship attacks on record," according to the Washington Institute, which has counted 28 confirmed attacks in the strait this month and 113 since the war began in February.
Flows through Hormuz are running at roughly 14 million barrels per day — only 82% of pre-war levels — even as total Middle Eastern exports have recovered above 24 million barrels per day via alternative routes. That 18% deficit is what keeps the risk premium alive.
Oil Prices Reflect the Fear, Not Yet a Real Shortage. Brent crude for December delivery settled at $116.72 on October 23 — a six-month high, roughly 20% above early-September levels.
Over the past month alone, Brent has risen 18.4%, and is up 78% year-over-year. USO climbed from $144.91 on October 6 to $169.53 by October 23 — a 17% sprint in under three weeks. But the rally is fragile: Trump's surprise pledge that the U.S. would not resume airstrikes before the midterm elections failed to reverse the jump in oil prices , while Brent declined 1.8% on Sunday after he told reporters "there will not be a strike today."
Freight Economics Are Luring Ships Back Into Danger. Tanker owners are increasingly willing to load cargoes inside the Gulf, lured by daily freight rates exceeding $1 million and steep discounts from regional producers. More ships sailing means more targets — and more headline risk for crude.
The Midterm Clock Creates a Binary Bet. Speculation is spreading that the U.S. and Israel could strike Iran again after the November 3 midterms; the New York Times reported that the two countries have drawn up plans for a short, concentrated strike.
Iran says the strait "will remain closed until conditions are met." A post-election escalation could push Brent toward its 2008 all-time high of $147.50; a ceasefire or deal could erase the premium overnight. USO holders are effectively betting on which scenario arrives first.