Oil spikes on US-Iran strikes — momentum play on oil stocks
Thesis
The U.S. military is actively striking Iran and reinstating a naval blockade in the Strait of Hormuz, a critical chokepoint for global oil. This direct conflict is severely disrupting supply routes and pushing oil prices higher. Additionally, U.S. inflation just fell by its largest margin since 2020, which removes the threat of immediate interest rate hikes that were dragging down the broader stock market. With energy supplies squeezed and broader market fear fading, funds are likely to rotate into oil stocks.
Strategy approach
Build a rule-based momentum strategy on USO using the H4 timeframe. Enter long when USO breaks above its 20-period high while the front-month WTI crude oil futures contract is within 2% of a 20-day high. Exit if USO drops 4% from the entry price or after a 14-day maximum holding period.