Hormuz Supply Risk Outlook
The Strait of Hormuz remains largely closed after Iranian attacks on shipping since the war began on 28 February. The route carries oil and petroleum products from Iraq, Saudi Arabia, Qatar, Kuwait and the United Arab Emirates, which may limit further price falls. On Sunday, OPEC+ agreed to raise output by 206,000 barrels per day for May. Reports said the group is ready to add barrels quickly if conditions in the Persian Gulf change. Traders are waiting for the American Petroleum Institute report due later on Tuesday. A larger-than-expected inventory draw can point to stronger demand, while a bigger-than-expected build can suggest weaker demand or excess supply. Looking back at this time in 2025, we remember the extreme volatility surrounding the potential US-Iran ceasefire. WTI crude was trading over $103, inflated by a war premium that has since disappeared from the market. The CBOE Crude Oil Volatility Index (OVX) had spiked to over 50, reflecting the deep uncertainty over whether the Strait of Hormuz would reopen. That ceasefire eventually held, leading to a sharp price decline through the summer of 2025 as supply routes normalized. Now, with WTI currently stable around $86 per barrel, the market seems to have forgotten how quickly geopolitical situations can shift. The latest EIA report confirms a slight global supply surplus of nearly 300,000 bpd, keeping prices in check for now.Options Strategy And Portfolio Hedge
This memory of a rapid price collapse from 2025 suggests caution against any aggressive long positions. Given the current stability, selling out-of-the-money call options with a strike price above $92 for June expiry appears to be a viable strategy to collect premium. This position benefits from both sideways price action and the passage of time. However, we must remain hedged against any unexpected supply disruptions, as OPEC+ has maintained its production discipline throughout early 2026. We are therefore buying cheap, long-dated put options to protect our portfolio against a potential economic slowdown that could push prices below $80. This provides a floor for our positions while we collect income from the sold calls. Create your live VT Markets account and start trading now.
Start trading now – Click here to create your real VT Markets account
