Geopolitical risk ignored as oil falls on Iran talks — short oil ETFs
Thesis
Normally, a massive military strike like the one Russia just launched would cause oil prices to spike as traders worry about energy disruptions. However, oil is dropping because the US and Iran are making diplomatic progress, keeping the Strait of Hormuz open and ensuring plenty of supply. When bearish supply dynamics overpower major bullish geopolitical risks, it shows overwhelming weakness in the oil market. By shorting oil or major oil producers, traders can capitalize on this downward momentum until the global supply picture tightens again.
Strategy approach
Build a trend-following strategy that enters short USOIL on D1 when price closes below the 10-day low during a period of normal or declining VIX. Exit if price closes back above the 10-day high. Set a 10-day max hold.