Strait Of Hormuz Risk Premium
US President Donald Trump said the US would escort tankers through the Strait of Hormuz if needed. He also said the US would provide political risk insurance for ships travelling through the Gulf to support energy shipments. The EIA reported US crude inventories rose by 3.475 million barrels last week, above expectations of 2.2 million barrels. The build followed a previous increase of 15.989 million barrels. On charts, WTI has stayed in an uptrend since a low of $54.88 on 16 December, with higher highs and higher lows. RSI was near 77, and MACD remained above its signal line with a rising histogram. Resistance stood near $77.20, then $79.00–$80.00, including $79.37 from 15 January 2025, with $85.00 beyond that. Support was seen at $69.00–$70.00, then the 21-day SMA near $65.86 and the 50-day SMA around $62.30.Options Positioning And Key Levels
We remember the tension in early 2025 when the US-Iran conflict pushed WTI to a one-year high near $77. The market was driven by fears of supply disruptions in the Strait of Hormuz. That geopolitical premium seems to be a persistent factor in today’s market. Today, the situation has evolved with WTI trading around $80 a barrel. Unlike the inventory builds we saw last year, the most recent EIA report showed US crude stocks increasing by only 1.4 million barrels, less than the expected 2.1 million. This suggests demand remains surprisingly firm. Given this backdrop, we are seeing increased volatility, making long call options an attractive strategy to capture upside potential while defining risk. The recent decision by OPEC+ to extend their voluntary production cuts of 2.2 million barrels per day through the second quarter provides a strong floor for prices. This commitment to supply management removes a significant amount of oil from the market, tightening the global balance. The resistance level we watched around $79-$80 in January 2025 has now become a key support zone. We are seeing significant open interest in WTI call options with strike prices at $85 and $90 for the coming months. A bull call spread could be a cost-effective way to play a gradual move towards those higher targets. However, we must remain watchful of the technical indicators, as the RSI is again approaching overbought territory, similar to the setup last year. Any sign of a diplomatic breakthrough in the Middle East or a slowdown in China’s economic recovery could trigger a sharp pullback. Therefore, using put options for downside protection is prudent. Create your live VT Markets account and start trading now.
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