Hedge funds slashed their U.S. dollar exposure and piled into crude oil and other key commodities last week, positioning themselves ahead of a sharp escalation in Middle East tensions, according to Saxo Bank’s latest Commitment of Traders (COT) report.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, said speculative investors ramped up bearish dollar bets and embraced risk assets like crude and platinum, buoyed by optimism over U.S.–China trade relations and seasonal strength in energy markets.
Data from the Commodity Futures Trading Commission (CFTC) covering the week ending June 10 showed a 31% surge in gross short positions on the U.S. dollar across eight major currency futures. The total hit a four-week high of $16 billion as the U.S. Dollar Index (DXY) slid to a new three-year low. Demand was strongest for the euro, British pound, and Canadian dollar, while traders extended net selling of the Japanese yen for a sixth straight week.
Crude Oil at Center of Pre-Escalation Buying Frenzy
The report highlights a broad wave of commodity buying just before Friday’s flare-up in the Middle East, when Israel launched strikes on Iranian nuclear and military targets. The attack sparked a 13% intraday spike in oil prices and heightened fears of a wider regional conflict.
In the lead-up, managed money accounts significantly increased their net long positions in crude oil, lifting the combined Brent and WTI tally to a 10-week high of 319,000 contracts. The move was driven by fresh long interest in Brent and a reduction of WTI short positions, as traders anticipated peak summer demand amid tightening global supply.
“While the dramatic escalation in the Middle East occurred after the reporting period, it validated much of the pre-positioning we saw in oil,” Hansen noted. Crude ended Friday 7% higher and extended gains early Monday before retreating, as markets weighed the risk of supply disruption.
Despite no immediate damage to oil infrastructure or exports, analysts warn that a worsening of the conflict—especially any threat to Iran’s exports or a blockade of the Strait of Hormuz—could send oil prices sharply higher. Conversely, a quick de-escalation could prompt a $10 pullback, Hansen cautioned.
Broad Commodities Rally, but Softs Buck the Trend
Beyond oil, speculative flows favored gas oil, platinum, soybeans, and livestock. Platinum stood out with a 13% price surge and a sharp increase in net long positions, underpinned by technical momentum and supply-tightening expectations.
In agriculture, soybeans found renewed support from improving Chinese demand outlook, while wheat shorts were trimmed. Corn, however, continued to face heavy selling amid a bearish production forecast.
Soft commodities were the exception to the bullish trend. Sugar shorts doubled on weakening fundamentals, while cotton also faced renewed pressure. Livestock markets remained firm, led by strong seasonal demand and supply concerns in hogs.
“With geopolitical risks on the rise and macro conditions shifting, speculative positioning is increasingly becoming a barometer for market sentiment,” Hansen said.
As markets await further developments in the Middle East, all eyes are on whether tensions will spill into oil infrastructure and global supply chains—or remain contained.
