Shares of the United States Oil Fund slid to $117.54 in pre-market trading on June 16, extending a punishing five-session selloff that has erased roughly 13% of the ETF's value since June 10. The catalyst: a tentative U.S.–Iran peace deal that promises to reopen the Strait of Hormuz, the narrow waterway through which roughly a fifth of the world's oil passes daily. For USO holders, the question is whether the fund is simply returning to fair value — or overshooting to the downside. Oil Prices Are Plunging on the Iran Deal — But Is the Market Celebrating a Peace That Hasn't Actually Arrived Yet?
Shares of USO tumbled to $117.54 pre-market, down 3% from Friday and 13% from its June 10 close of $134.30, as traders rushed to unwind the wartime fear premium built into crude oil since the U.S.–Iran conflict erupted in late February. Crude oil plunged more than 5% to around $80 per barrel on Monday, touching a two-month low after the U.S. and Iran reached a peace agreement aimed at reopening the Strait of Hormuz by the end of the week. For USO holders — the fund tracks front-month WTI crude futures — the speed of the unwind raises a critical question: has the selloff already overshot?
The War Premium That Inflated USO Is Evaporating Fast. Oil prices rose roughly 40% since the conflict began, as Tehran forced the effective closure of the narrow waterway through which about a fifth of global energy flows.
Trump declared "The Deal with the Islamic Republic of Iran is now complete," saying Hormuz will open without a toll system and the U.S. will end its naval blockade. That rhetoric alone has been enough to erase weeks of gains. USO's 52-week range spans from $65.99 to $154.08 , meaning the fund is now roughly midway — far from the panic highs but still well above pre-war levels.
Mines, Insurance, and Stranded Ships Mean the Oil Won't Flow Overnight. Maritime security sources put the clearance timeline at 40 to 50 days using minesweepers and underwater drones, though one analyst estimates a more conservative six months for a comprehensive sweep.
Even at the optimistic end of forecasts, energy flows are unlikely to exceed half of prewar levels within the first month, and a full recovery stretches toward late 2026 or beyond. In other words, the market is pricing in supply relief that could be months away.
The Deal Itself May Not Hold. Discrepancies between the U.S. and Iranian understanding of the agreement have already emerged — Iranian state media says Hormuz will be toll-free for only 60 days, after which Iran and Oman will administer the strait.
Risks remain as tensions continue, with reports of drones targeting commercial vessels. A collapse in talks would snap crude — and USO — sharply higher.
China's Weakening Demand Adds a Structural Headwind. China, the world's largest oil importer, needs much less fuel than previously thought.
OPEC has lowered its forecast for world oil demand growth in 2026 to 970,000 barrels per day, its second straight downward revision. Even if Hormuz fully reopens, softening demand limits USO's upside rebound potential.
Bottom line: The selloff is driven by hope, not confirmed supply. Holders face asymmetric risk — a deal collapse reignites the premium, but successful execution meets weakening global demand. The next 40 days matter more than the headline.