Unprecedented! The United States is set to personally "direct" crude oil futures trading—Treasury Secretary Benson to "return to his old profession"?

The U.S. Treasury Department is assessing the possibility of taking direct action in the crude oil futures market to curb the surge in oil prices triggered by the Iran conflict. This would be a rare—and possibly “unprecedented”—market intervention from Washington, aiming to influence price expectations rather than tapping physical crude oil supplies.

According to Reuters, a senior White House official revealed that the U.S. Treasury may announce a series of measures to counter rising energy prices as early as March 5 (Thursday), which may include direct intervention in the oil futures market. Since the plan’s details remain unclear, the official refused to disclose specific tactics ahead of time, saying they did not want to preempt the Treasury’s announcement.

The direct cause for this intervention is the market’s violent volatility. Since conflict with Iran broke out last Saturday, U.S. crude futures prices have soared nearly 21% due to disruptions in Middle Eastern oil supplies, directly driving up fuel costs and sparking concerns about a rebound in inflation.

Despite intense market focus on possible Treasury action in the energy markets, U.S. President Trump remains composed. He made clear that current priorities are military operations rather than intervening in short-term oil prices, and expects prices to quickly retreat once the conflict ends.

Benson Returns to His Roots

The idea of intervening in the futures market is closely tied to Treasury Secretary Benson’s deep financial background.

Benson previously served as the chief investment officer at Soros Fund Management, later founding the macro hedge fund Key Square Group, and has decades of experience in currency, bond, and commodity trading.

From an operational perspective, Phil Flynn, senior analyst at Price Futures Group, described this move as “a highly creative out-of-the-box action,” and noted the most likely method would be “selling the near end of the futures curve and buying the far end,” thus pushing down near-month contract prices and stabilizing market panic. Flynn also pointed out that the Treasury’s traditional functions focus on fiscal policy, debt management, and occasional currency intervention, having never entered the realm of commodities such as oil.

Precedent: ESF and History of Quantitative Easing

Although intervention in the oil futures market is unprecedented, it is not without precedent for the U.S. government to use financial tools to stabilize markets.

During the 2008 financial crisis, the Fed implemented quantitative easing through large purchases of mortgage-backed securities and Treasuries. The Treasury’s Exchange Stabilization Fund (ESF) stepped in last October to buy pesos and provided Argentina a $20 billion swap facility to support its currency exchange rate. The fund, established during the Great Depression, had total assets of $220.85 billion as of January 31 this year, and has repeatedly supported the Fed’s lending tools during the 2008–2009 global financial crisis, COVID-19 pandemic, and 2023 U.S. banking crisis.

Moreover, Mexico has long run the “Hacienda hedge,” an oil revenue protection strategy that was once the world’s largest financial oil trade, but its hedge targets physical oil inventories, fundamentally different from a purely financial tool.

Analysts: Short-Term Deterrence Possible, Unlikely to Patch Supply Gap

Several market analysts have expressed skepticism about the actual impact of Treasury intervention, arguing that the boundaries of financial tools depend on whether physical supply can be restored.

Stratas Advisors President John Paisie said this measure may curb speculation by making traders aware that the U.S. government stands on the opposite side, thus slowing the price surge, “but it doesn’t solve the issue of interrupted physical supplies—the closure of the Strait of Hormuz is significant, and there is no idle capacity outside the Gulf region. Ultimately, if large volumes of oil supply remain blocked, financial operations won’t be effective; traders will keep betting on oil price increases, because prices really ought to be higher.”

IG market analyst Tony Sycamore believes that even if the Treasury directly intervenes in futures contracts, “it may cause a brief pause or scare off some speculative longs, but I doubt the effect would last more than a day or two. The oil market is huge, global, and driven by real supply and demand fundamentals—especially when shipping through the strait is already blocked and the threat of Iranian drones is real, Treasury’s verbal or symbolic actions are unlikely to change the situation.”

Marex analyst Ed Meir points out the potential risks: “If they plan to depress prices by selling futures, it’s a big gamble and would be an unprecedented intervention in the crude oil market. The direct question is: if prices continue to rise, and short positions suffer losses, what will they do? Use the strategic petroleum reserve for delivery, or keep adding margin and toughing it out?”

Ben Hoff, head of quantitative commodities research at Societe Generale, called this potential move “unprecedented” and stressed that financial tools ultimately have limited power in energy markets: “The devil is in the details, we need to see more of the U.S. government’s specific plan.”

Market Sentiment Intensifies: Record Hedge Trades

As Washington develops its intervention plan, derivative trading activity in the crude oil market has reached fever pitch. With WTI crude futures poised for the biggest weekly gain since March 2022, both producers and consumers are rushing in.

Energy Aspects data shows that this week, U.S. producers’ hedge trades hit the highest single-day record since the data stream started in 2023. Traders say it’s been their busiest trading week for major dealers serving both producers and consumers.

Producers are seizing the rare price window to lock in future sales profits through forward contracts. This dramatic dumping of long-dated contracts has led WTI’s futures curve to a severe spot premium (near-month contracts trading far above distant months), with the price spread between June and December soaring from $1.48 to $8.21 in just two weeks. Meanwhile, options collar strategies are becoming more attractive, as producers buy puts for downside protection and sell calls to lower hedging costs.

Facing this, oil consumers are also moving quickly. Rob McLeod, head of energy price risk solutions at Hartree Partners, said on LinkedIn that for airlines that once considered hedging “too expensive” or “too risky,” this week is a profound lesson: “Counting on luck is not a strategy.”

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