US Energy Secretary Chris Wright said any release from the Strategic Petroleum Reserve would likely be done through swaps. He said swaps are meant to cover short-term supply breaks without direct cost to taxpayers. He said a release could help the oil market get through a few weeks of disruption. The comments were reported by Reuters, based on interviews with CNBC and CNN.

Strait Of Hormuz Risks

The remarks came as tensions involving Iran raised concerns about the Strait of Hormuz. The strait is a key route for global oil shipments. Wright said reopening the strait is a priority. He said Iran’s ability to threaten regional shipping must be neutralised. He said any military operation linked to the crisis would likely take weeks, not months. He also said US naval escorts for commercial vessels are not in place now, but could be possible before the end of the month. Wright said oil markets in the Western Hemisphere are “not really tight” compared with Asia. After the comments, West Texas Intermediate rose 5.10% on Thursday to about $91.75 per barrel.

Trading And Hedging Implications

With WTI crude jumping over 5% to pass $91, the immediate focus is on volatility. Geopolitical risk is being priced back into the market, meaning implied volatility on options will surge. We should consider strategies like straddles or strangles that profit from large price swings in either direction, as official statements conflict with the market’s fear. The signal of a Strategic Petroleum Reserve swap, not a direct sale, is meant to calm the market by offering a short-term supply bridge. This suggests that selling near-term, high-premium call options could be a viable strategy, betting that a release will cap any immediate runaway rally. We saw how the massive releases back in 2022 put a temporary ceiling on prices, and the market will remember that. The key takeaway is the difference between Western and Asian markets. This points directly to trading the Brent-WTI spread, which should widen significantly as Brent is far more exposed to any disruption in the Strait of Hormuz. With roughly 21 million barrels per day passing through that chokepoint, we can expect the spread to push well beyond its recent $4 range. Despite the talk of a “weeks-long” resolution, the underlying threat of a wider conflict will support prices for longer. Buying call options dated further out, for instance in the June or July 2026 contracts, allows us to maintain bullish exposure beyond the expected period of an SPR swap. This is especially true as global oil demand remains robust, with recent forecasts projecting growth of over 1.2 million barrels per day this year. For consumers of fuel, like airlines and industrial companies, now is a critical time to hedge against further price shocks. Locking in costs by buying futures or call options is prudent, as the risk of crude oil testing $100 per barrel is now very real. With the SPR holding just over 360 million barrels, we know its ability to manage a prolonged outage is much more limited than it was years ago. Create your live VT Markets account and start trading now.

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