Discover how global tensions and the rise of autonomous vehicles could reshape the future of oil—and what it means for your portfolio.
As tensions between Israel and Iran escalate, the global oil market teeters on the edge of a potential $200 per barrel spike.
While political uncertainty has historically driven oil prices higher, investors face a much larger long-term threat—the rise of electric and autonomous vehicles (EV/AV).
This newsletter dives into the geopolitical and technological forces at play and explains how oil ETFs like the United States Oil Fund (USO) are positioned to react.
Whether you’re looking for short-term gains or long-term plays, this analysis will guide you through the volatile landscape.
Currently, USO trades at $77.56, with a 52-week range between $63.84 and $83.41. Could these numbers soon reflect a much more dramatic shift?
A Geopolitical Powder Keg – Could $200 Oil Happen?
The Israeli-Iranian conflict has the potential to send shockwaves through global oil markets.
Iran, the world’s seventh-largest oil producer, accounts for 4% of global oil production. If Israel retaliates by targeting Iran’s oil infrastructure, prices could skyrocket.
Analysts like Bjarne Schieldrop from SEB believe that a full-scale attack could push oil prices past $200 per barrel.
Oil ETFs, like USO, closely follow oil price movements.
Over the past week, the USO price jumped 4%, reflecting the growing uncertainty in the region.
However, supply imbalances could temper these gains. Saudi Arabia and OPEC+ nations have signaled plans to boost production in December, potentially filling any gaps caused by Iranian supply disruptions.
While oil has seen spikes like this before, sustained triple-digit prices seem less likely—at least in the short term.
CNBC reports that any disruptions would be felt globally, especially in markets like China, which relies heavily on Iranian oil.
Expect competition for alternative supplies, pushing up oil and ETF prices temporarily.
A Long-Term Threat: The Rise of Autonomous and Electric Vehicles
While geopolitical conflicts could send oil prices soaring, the long-term outlook for oil is increasingly under threat from the EV/AV revolution.
Transportation accounts for over 50% of global oil consumption, but with autonomous and electric vehicles rapidly becoming mainstream, the oil market could face an existential crisis.
The transition is already underway.
A 2022 McKinsey & Company report found that 25-30% of urban residents would consider using shared autonomous vehicles as their primary transportation mode if widely available.
Companies like Tesla, Waymo, and Baidu are leading this revolution, with Tesla's all-electric robotaxi on the horizon. As autonomous technology becomes more common, the demand for oil could plummet.
In the meantime, oil ETFs like USO are benefiting from current volatility, but the question remains: how much longer can these gains last before the EV disruption becomes reality?
The current USO price of $77.56 could face downward pressure in the long run as more fleets convert to electric.
Oil ETF Timing – When to Take Action
Timing your oil ETF investments is crucial.
Although geopolitical turmoil may offer short-term opportunities, the long-term trend suggests a more bearish outlook for oil.
Saudi Arabia’s threats of a price war, combined with additional supply from the U.S. and other oil-producing nations, could push prices as low as $50 per barrel.
However, a longer-term supply-demand reversal is predicted for late 2025, which could result in a more bullish market for oil.
That said, the 52-week high for USO at $83.41 serves as a benchmark for potential short-term gains, especially if tensions escalate further.
But beware of the looming threat from EVs and autonomous vehicles, which could permanently reduce global oil demand in the coming decade.
The International Energy Agency (IEA) forecasts that oil demand won’t plateau until the 2030s, giving investors a narrow window to capitalize on current prices.
Conclusion
The future of oil—and oil ETFs like USO—is uncertain, with short-term geopolitical risks potentially driving prices higher, but long-term threats from EV and autonomous technologies could change the game entirely.
Now is the time to stay informed and be prepared to adjust your strategy.
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