Hedge Funds Retreat from Energy as Oil Prices Plunge

June 30, 2025

Hedge funds offloaded energy stocks at one of the fastest paces in the past decade, according to a report from Goldman Sachs. The week ending June 27 saw a sharp $10 drop in oil prices, triggered by easing geopolitical tensions in the Middle East after a ceasefire between Israel and Iran. This, combined with expectations of increased oil supply from OPEC+, led to a significant reversal in bullish energy positioning.

In North America and Europe, hedge funds broadly sold off shares in oil producers, refiners, and energy services firms. In Europe, the selloff was more aggressive, with investors not only reducing long positions but also ramping up short bets. While this marks the steepest single-week energy sector outflow since September 2024, Goldman noted that hedge funds remain net long on energy overall, suggesting many are still anticipating a potential rebound in prices or future supply shocks.

Despite the energy selloff, hedge fund leverage remains near a five-year high, indicating that funds are staying active and aggressively repositioning capital. Much of the divested capital flowed into financials, industrials, and tech, making the past week the strongest for net equity accumulation in over a month. The report signals a broader tactical shift, as funds respond to global macro events with swift reallocations, particularly in sectors most sensitive to commodities and interest rate expectations.