Hedge funds increased their bullish positions in crude oil at the fastest pace since March, even as oil prices fell sharply on Monday after signs of renewed diplomatic efforts between the US and Iran eased concerns over global energy supplies, according to a report by Bloomberg.
Brent crude dropped more than 7% in early trading after US President Donald Trump said planned military action against Iran had been suspended in favour of fresh negotiations aimed at reopening the Strait of Hormuz. The prospect of reduced geopolitical tensions prompted investors to unwind some of the risk premium that had built into oil markets during months of conflict.
The pullback followed a period in which hedge funds had significantly increased long positions in crude, betting that escalating tensions in the Middle East and the threat of supply disruptions would continue to push prices higher. The latest positioning highlights how quickly macro funds have responded to geopolitical developments in one of the year’s most actively traded commodities.
The decline in oil prices also rippled across broader financial markets. US Treasury prices rose as easing energy costs reduced near-term inflation concerns, pushing the benchmark 10-year Treasury yield lower. Equity index futures in the US and Europe moved higher, while Asian markets were weighed down by another bout of volatility in semiconductor stocks.
Currency markets remained equally active. The Japanese yen strengthened further amid expectations of additional coordinated intervention by Japan and the US, while the US dollar weakened against major peers.
Despite Monday’s sell-off, market participants cautioned that volatility is likely to remain elevated. While renewed diplomatic engagement has improved sentiment, investors remain focused on whether negotiations can produce a lasting agreement capable of restoring normal shipping through the Strait of Hormuz, a vital route for global oil exports.
The uncertainty continues to present opportunities for global macro and commodity-focused hedge funds, many of which have actively traded energy markets throughout the recent conflict.
At the same time, artificial intelligence remained a key driver of equity market performance. South Korea’s Kospi Index fell more than 5% as chipmakers gave back part of last week’s record gains, while Chinese technology stocks outperformed following the release of new AI models by leading developers.
