Black Gold

After the rise of gold and silver, the next commodity that got the world’s attention is crude oil, known as “black gold” colloquially. The recent conflict in the Persian Gulf saw the chokehold of the vital waterway known as the Strait of Hormuz, affecting some 20% of the world’s daily crude oil supply, majority of which were destined for Asia.

The effects were already felt within the last week or so. Most of the crude oil prices had passed the USD 100 per barrel mark, prompting diesel and petrol prices to spike, and the consequential prospect of inflation returning caused by rising costs of transportation of goods.

 

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Crude Oil in The Bedokian Portfolio

Crude oil is one of the three items to include in the commodities asset class of The Bedokian Portfolio. Unlike gold and silver, both of which can be held physically, for crude oil the simplest way for a layman investor to hold them would be via exchange traded funds (ETFs). The tricky part is that almost all these ETFs use derivatives called futures as their underlying assets, and due to their mechanics (like contango and “rollovers”), they do not really reflect the actual movement of spot oil prices. Hence, I consider crude oil to be optional for inclusion for investors who do not understand how they work.

The recent trade volume of crude oil ETFs had increased not seen since the start of the Russian-Ukraine conflict in 2022, denoting interest in such financial instruments in light of the recent confrontation. Using the United States Brent Oil Fund (BNO) ETF, which I oft utilised for oil plays, the price had shot up almost 41% since 27 Feb 2026¹, the day before the attacks began.

The Bedokian’s Take

If the fighting goes on and the oil blockade enforced, oil prices would likely remain elevated. The duration of wars is unpredictable, and for them to end would require at least one side to capitulate or both sides to agree, something which only the direct participants would know.

On the investment front, if one has the oil ETFs bought before the current crisis, the choice is either to realise some profits or to average up slowly using around 10-20% of the initial capital; the latter method is to provide a price buffer and some gains if oil prices come down suddenly.

Crude oil aside, there are other non-related counters that experienced a drop in prices, too. This is where one could find underpriced but fundamentally stronger companies to invest.

Finally, some analysts and economists were viewing this scenario akin to that of the 1973 Oil Crisis, where it was followed by a period of stagflation, i.e., inflation with slow economic growth. Whether this may happen is uncertain, but it always pays to have a diversified portfolio.

Disclosure

The Bedokian is NOT vested in BNO currently.

Disclaimer

1 – Yahoo Finance.