Crude oil is hot: What are the investment options?

The most common method of investing in oil futures contracts enables investors to trade on their expectations of future crude oil price movements

• Crude oil investments include futures, ETFs, and stocks.
• Oil market volatility driven by Iran conflict and global factors
• Tax rules differ for MCX, US ETFs, and Indian energy ETFs

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Crude oil is one of the world’s most actively traded commodities, and its price movements often mirror shifts in the global economy and geopolitics. The world currently consumes more than 100 million barrels of oil each day, highlighting how deeply crude oil underpins global transport, industry, and energy supply. In financial markets, however, trading activity far exceeds physical demand, with WTI futures alone seeing an estimated 1.2 to 2 billion barrels traded each day on paper.

Due to the high daily trading volume, even small disruptions in supply, production or demand can lead to notable price fluctuations. As a result, many investors consider oil a useful asset for diversifying their portfolios or taking advantage of price movements.

Oil markets remained volatile amid uncertainty over the war in Iran and shipping through the Strait of Hormuz. While US President Donald Trump suggested that the conflict could end soon, US officials said military operations were intensifying, and diplomacy looked unlikely. West Texas Intermediate (WTI) crude stayed below $85 per barrel after reports that the IEA (International Energy Agency) planned a record oil reserve release.

How crude oil price jumped amid conflict

WTI crude oil has delivered a strong gain over the past year, rising from $67.04 per barrel on March 12, 2025, to about $83.40 per barrel as of March 11, 2026, an increase of roughly 24.4 percent. However, most of the annual rise has occurred only in recent days. For much of the year, prices largely moved within a $55–$70 range before a sharp rally emerged in early March. Since the conflict between Iran and the US began on February 28, 2026, crude oil price has jumped from about $66.65 per barrel to $83.40, a surge of nearly 25 percent, highlighting how geopolitical tensions can rapidly drive oil prices higher.

Those who want to invest in crude oil have multiple options, depending on their willingness to take risks,  investment duration, and understanding of the market. These options range from directly trading oil derivatives to investing through funds or shares of energy companies.

Oil Exchange-Traded Funds 

Exchange-Traded Funds (ETFs) that track oil prices or oil-related indices have become a popular method for investors to access oil markets. Oil ETFs provide a simpler way for retail investors to gain exposure to crude oil without directly trading futures. These funds may track crude oil benchmarks, such as WTI crude oil or Brent crude oil.

“The most direct way is to open a global account for US-listed ETFs like USO (United States Oil Fund). It’s great for tracking the price, but you need to hold for at least two years to qualify for the 12.5 percent long-term tax; sell earlier, and it’s just added to your regular income at your slab rate. Also, remember that moving more than Rs 10 lakh abroad in a year triggers a 20 percent TCS (Tax Collected at Source) at the bank,” said Ankit Patel, Co-founder & Partner, Arunasset Investment Services.

“You can use Indian Energy ETFs that hold companies like ONGC. They follow domestic equity rules, meaning you only wait one year for that 12.5 percent long-term rate and get a Rs 1.25 lakh tax-free buffer. If you exit early, it’s a 20 percent short-term tax. Each has its own vibe, so pick based on your timeline and tax bracket,” added Patel.

Shares

Investors can also buy shares in oil companies that explore oil, produce it, and refine it. Piyush Jhunjhunwala, Founder & CEO, Stockify, said, “When oil prices rise, major energy companies, such as ExxonMobil, Chevron, and BP, often benefit, giving investors indirect exposure to movements in crude oil prices.”

Trading on MCX

The most common method of investing in oil futures contracts enables investors to trade on their expectations of future crude oil price movements. Experienced traders prefer this method because they can manage risk by drawing on their experience with the unpredictable nature of futures markets and their margin requirements.

“There is the Multi-Commodity Exchange of India Limited (MCX) route for trading oil futures locally. It’s direct and fast, but since this is treated as business income, your profits are always taxed at your standard slab rate, no matter the holding period. There’s no capital gains break here, though you can write off expenses like brokerage or internet bills,” said Patel.

“Commodity exchanges give Indian investors the opportunity to engage in crude oil derivative trading,” said Jhunjhunwala.

Trading crude oil futures on the MCX allows investors to take positions based on expected price movements, but the strategy carries significant risk. Futures trading involves leverage and margin requirements, which can amplify both gains and losses in a highly volatile market like crude oil. As a result, this route is generally preferred by experienced traders who typically understand the unpredictability of commodity markets.

What you must know

Crude oil investments require careful assessment of several global factors. “Global supply-demand dynamics, geopolitical tensions, Opec decisions, and currency movements need to be evaluated before making any investment decisions, since these factors have a major influence on crude oil prices. The sector requires a diversified strategy, combined with a long-term investment approach to handle its price fluctuations,” said Jhunjhunwala.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.