United States Oil Fund LP (NYSE:USO) is trading higher Tuesday morning as escalating developments in the U.S.-Israel-Iran conflict appear to be pushing more geopolitical risk back into crude prices. Here's what investors need to know.

Trump's De-Escalation Narrative Faces Immediate Pushback

While President Donald Trump said Monday that the U.S. and Iran had engaged in "very good and productive" discussions and that he ordered a five-day pause on strikes against Iran's power and energy infrastructure, that de-escalation narrative quickly came under pressure. Iranian officials denied that any negotiations had taken place, while fresh hostilities continued to unfold overnight.

According to the update, Iran's Revolutionary Guard warned Israel of heavy and unrestricted missile and drone strikes, a top Iranian official threatened U.S. forces and vessels in the Arabian Gulf if Washington attacks Iranian infrastructure, and Israeli Prime Minister Benjamin Netanyahu said military operations would continue until a deal is finalized. Israeli media also reported that an Iranian missile hit Tel Aviv, causing damage and minor injuries.

Why Rising Oil Futures Would Lift USO Shares

That backdrop would likely support USO because the fund is tied to oil futures, and crude often rises when traders fear supply disruptions tied to Middle East conflict. Any threat involving Iranian infrastructure, Gulf shipping lanes or U.S. military assets in the region can add a risk premium to oil prices. In turn, rising crude futures would tend to lift USO shares.

USO Shares Gain Tuesday Morning

USO Price Action: United States Oil Fund shares were up 3.25% at $114.16 at the time of publication on Tuesday, according to Benzinga Pro data.

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