MW The $250 million daily bet: How the Iran crisis triggered a frenzy in leveraged oil trades

By Jules Rimmer

Direxion reports surging interest in high-leverage energy ETFs as Middle East hostilities fuel-market volatility

Disruption of commercial traffic in the Strait of Hormuz has created trading opportunities in energy markets.

Trading oil at present is no plain sailing because transiting a tanker through the Strait of Hormuz is no plain sailing, either.

And as investors look for new ways to take advantage of unprecedented volatility in hydrocarbon prices, exchange-traded funds offering leveraged returns on that volatility are becoming increasingly popular.

Ed Egilinsky, managing director and head of sales at the financial-products provider Direxion, can attest to that. His firm is best known for specializing in leveraged or inverse ETFs - those enabling an investor to benefit from downward moves in an asset price - and Direxion has launched more than 120 such investment vehicles since entering that market in 2008.

Direxion has seen a spike in interest in some of its leveraged oil ETFs since the outbreak of hostilities in the Middle East in late February, Egilinsky told MarketWatch in an interview on Wednesday.

For instance, volumes for the Direxion Daily Energy Bear ETF ERY, which offers two times the return of the underlying S&P Energy Select Sector (XAEM26), have climbed from around $20 million daily at the start of March to more than $110 million a day last week. Other leveraged ETFs, such as those that offer two times the upside GUSH or downside DRIP returns of the S&P's Oil & Gas Exploration index XX:SPSIOP, have also seen a huge boost in turnover to more than $250 million daily during the week before Easter.

Egilinsky attributed that mounting popularity to the current crisis in the Middle East. He described "a wide range of players - from retail traders to institutional investors, hedge funds and prop desks" - all seeking to profit from the turbulence in energy prices provoked since the U.S. and Israel launched their joint attack on Iran on Feb. 28.

It's not just higher average volumes but also an increased number of market participants. Still, Egilinsky cautioned, these products are "designed for sophisticated investors only," partly owing to the riskiness of the underlying products, but mostly because returns are amplified.

Enticements for investors are relatively low-cost funds, with annualized management fees typically below 1%, and, of course, immediate paybacks. Owing to a potential 200% return profile, that can come in spades if the call is right. Investors could instead look at an ETF offering straightforward exposure to energy companies XLE, but that would not offer leverage.

Ed Egilinsky of Direxion responds to a question during a Nasdaq panel in 2025.

Investing directly in oil and gas shares clearly involves taking on more stock-specific risk, and the returns may not be correlated exactly, or immediately, with the underlying commodity.

Moreover, while going long a risk asset is relatively straightforward, being able to express a bearish position by buying an ETF designed to replicate downward moves offers a simple solution, Egilinsky added. It also limits the losses to the initial amount invested rather than saddling an investor with unlimited exposure, as occurs with some option strategies.

Egilinsky's prediction of continued investor focus on the energy sector would appear to be reinforced by the commodities research team at Goldman Sachs, which has warned that the situation remains "fluid" and "fragile" despite the cease-fire agreement announced Tuesday.

In the adverse scenario whereby the truce fails to hold and the Strait of Hormuz is blocked for another month, Goldman, whose forecast calls for Brent crude (BRN00) to be at $80 a barrel by year-end, cautioned that it could still be averaging $100 in the final quarter of the year. In an extremely bearish situation, where an even later opening of the strait is further complicated by production losses, strategists say $115 a barrel is possible.

Risks to oil prices remain skewed to the upside, says Goldman Sachs.

Read on: Oil prices rise as concerns about 'fragile' cease-fire see Goldman warn of $115 crude by end of the year

-Jules Rimmer

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

April 09, 2026 10:27 ET (14:27 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.