Market News

For bedroom traders unafraid of a risky bet, the markets have presented a unique opportunity in recent weeks.

The price of oil, usually relatively stable, has been swinging wildly in response to developments in the Iran war and Donald Trump’s social media posts about it.

It presents an opportunity to make potentially large sums gambling on which way it will go next – though the risk of a wipeout is equally sizeable.

Data from trading platform Capital.com show the number of so-called retail investors, as opposed to professional, making trades in oil markets has increased by more than 1,650pc since the war broke out last month.

Most are using so-called derivative contracts to make bets on which way the price will go in the coming hours and days.

Michele Tieghi, a London-based entrepreneur, is one of those who have invested in oil for the first time since the conflict began.

“Given the geopolitical tensions in the region, I anticipated that oil prices could become more volatile,” he said.

“Historically, events in the Middle East can have a rapid impact on energy markets, so I believed there was potential for a short-term price swing.”

After betting $1,000 (£758) in the days after the first strike on Iran, Mr Tieghi cashed out with a $500 profit by March 9.

Daniela Sabin Hathorn, an analyst at Capital.com, said commodities such as oil typically attract professional investors who decide what to do based on dynamics like supply and demand.

By contrast, retail investors are typically simply trading the headlines. They are “responding to each new news development rather than to supply and demand dynamics, production data, or inventory figures”.

The stampede of amateur investors piling into oil is reminiscent of the so-called “meme” stocks, where people – stuck at home and bored during Covid-19 – poured cash into companies such as struggling retailer GameStop and cinema chain AMC Entertainment.

The investment in these businesses was driven more by nostalgia and hype than any fundamental belief about each company’s earnings potential.

However, the sheer number of bedroom traders getting involved was enough to drive share prices wildly higher.

War in the Middle East has had major effects on the oil market, driving the price of a barrel of Brent crude from about $73 on the eve of the conflict, to $116 today.

However, price moves have not been straightforward and swings of 5pc or more in either direction have become common.

Such moves can bring handsome profits if you bet the right way. But investors can also be caught out if the market turns against them. Many used borrowed money to juice their bets, but this means even small moves against them can often wipe out an entire position.