Profiting from the Iran war? U.S. Department of Justice reportedly investigating $2.6 billion suspicious short-selling oil trades
The Iranian conflict continues to stir up risks in global financial markets, and the latest reports reveal that US regulators have finally launched an investigation into those highly accurate, large-scale oil short positions.
On Thursday, Eastern US time, US media cited sources reporting that the US Department of Justice is working jointly with the top commodities regulator—the US Commodity Futures Trading Commission (CFTC)—to investigate at least four oil trades related to the Iran war situation, all precisely timed. The total scale of these trades exceeds $2.6 billion, all betting that oil prices would fall following major geopolitical news announcements, and almost all bets hit the mark.
The report states that the investigation focuses on whether the traders involved had advance access to non-public information about US military actions against Iran, ceasefire negotiations, or diplomatic statements.
After these revelations, "war insider trading" again became a topic of common concern for Wall Street and Washington.
According to US media disclosures on Thursday, the most scrutinized transaction under investigation occurred on March 23. At that time, former US President Trump suddenly announced a delay in further military actions against Iran; just minutes before the news was made public, there was a bearish oil bet in the market worth as much as $500 million. Subsequently, oil prices plunged sharply, and the trader made a huge profit.
Additionally, before the US-Iran ceasefire news was announced on April 7, the market saw another large short position close to $960 million; in late April, ahead of further diplomatic breakthrough news, there were several similar trades in the hundreds of millions of dollars range.
Other US media reported that about an hour before media released "the US and Iran are close to reaching a diplomatic agreement" on May 6, the market suddenly sold over $700 million of Brent crude oil and US WTI oil futures within just five minutes in the early morning. Since the trade happened during a period of low liquidity, industry insiders widely believe it was "very unusual."
Quoting traders and analysts, the media reported that just the anomalous trade in the early hours of May 6 involved more than 17,000 WTI contracts, with a total value of around $1.7 billion. After the news broke, both Brent and WTI crude oil plunged more than 10% during the session; by closing, Brent fell about 7.8%, and WTI about 7%.
Currently, both the US Department of Justice and CFTC have refused to publicly comment on details of the investigation. However, this is not the first time US regulators have paid attention to trades related to the Iran conflict.
As early as April, reports indicated that the CFTC had begun investigating a series of suspicious oil futures trades that occurred before Trump’s Iran policy “shift.”
Democratic members of the US Congress are also maintaining pressure on regulatory bodies. Senators Elizabeth Warren and Sheldon Whitehouse previously requested that the SEC and CFTC investigate "unusual oil trades possibly involving insider information leaks"; House Representatives Sam Liccardo and Ritchie Torres have also respectively written to regulators, demanding thorough investigations into large oil market bets during the Iran conflict.
As the investigation expands, concerns over the "financialization of war" in the market are quickly mounting.
British media previously revealed that in the crypto prediction market Polymarket, there have been massive, precise bets targeting Iranian airstrikes, ceasefires, and Iranian regime stability. Some traders even placed bets hours before military action was announced.
Recently, the Israeli side has even charged two people suspected of using military internal intelligence to bet on Iranian airstrike events, including a reserve Israeli military officer. Prosecutors claim the two profited over $150,000 on Polymarket by using confidential military information.
For global energy markets, Iran war risk has already become one of the most important sources of volatility this year.
Earlier this week, reports indicated that due to wild price swings triggered by the Iran conflict, Occidental Petroleum has decided to suspend new crude oil hedging trades. The company noted that since the start of this year, Brent oil has surged over 90%, and WTI crude nearly 77%.
Meanwhile, Federal Reserve officials also began warning that the Middle East conflict could evolve into a "persistent inflation shock." Soaring oil prices, shipping disruptions, and supply chain disturbances could further push up US inflationary pressure.
For Wall Street, perhaps the bigger question is: if someone truly knew the timing of war, ceasefire, or diplomatic agreements in advance, is the market trading on public information, or is it trading on an "internal script"?
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