Oil prices rose for a second day on Friday, with US West Texas Intermediate (WTI) near $93.00 per barrel. Movement through the Strait of Hormuz remains restricted, maintaining a de facto blockade and adding strain to a fragile Iran ceasefire.
Hormuz Strait Monitor data shows 12 ships crossed the waterway in the past 24 hours, compared with up to 140 per day before the war. The US President cited poor handling of the Strait by Iranian authorities and said on Truth Social, “That was not the agreement we had”.
Peace Talks Remain Uncertain
US-Iran peace talks, expected to start on Saturday, remain uncertain. Tehran said it will not join negotiations until Israel stops attacks on Lebanon.
Israel said it has authorised direct talks with Lebanese authorities, while stating operations against Hezbollah will continue. Iran warned of strong responses if attacks continue, and Hezbollah has reportedly fired missiles at Israel.
Attention is also on the US Consumer Price Index (CPI) due later on Friday. Price pressures are expected to rise above the Federal Reserve’s 2% rate, increasing expectations of at least one interest rate rise this year.
A correction issued on 10 April at 10:15 GMT said the talks are expected to start on Saturday, not Tuesday.
Market Focus Shifts To Volatility
Looking back at this time last year, we saw WTI crude oil prices pushing towards $93 per barrel due to severe restrictions in the Strait of Hormuz. The failure of the US-Iran peace talks and escalating conflicts between Israel and Hezbollah created a significant supply-side risk premium. This set the stage for a volatile period that we are still navigating today.
The situation did indeed escalate through the summer of 2025, with the strait’s blockade tightening and pushing oil prices past $115 by the third quarter. While transit through the Strait of Hormuz has partially recovered, recent data from early April 2026 shows traffic is still only around 65% of pre-war levels, averaging 90 ships daily. This persistent bottleneck keeps supply chains fragile and prices sensitive to any regional news.
Currently, with WTI hovering around $105 per barrel, implied volatility in crude options remains elevated. The CBOE Crude Oil Volatility Index (OVX) is sitting near 42, reflecting deep market uncertainty about future supply disruptions. This high volatility means option premiums are expensive, but it also signals the potential for large price swings in the weeks ahead.
Given this environment, we see traders positioning for further upside risk by purchasing long-dated call options or using call spreads on WTI and Brent futures. A renewed escalation in the Middle East could easily trigger another price spike toward the 2025 highs. These positions offer exposure to that potential while defining the maximum risk for the trader.
On the other hand, we must consider the demand side of the equation, which has shifted considerably since last year. That high US CPI reading in April 2025 did lead the Federal Reserve to implement one final rate hike in July 2025. Now, recent economic data from the first quarter of 2026 shows slowing global growth, fueling fears of demand destruction.
This creates a tense standoff between bullish supply risks and bearish demand concerns. Therefore, a prudent strategy involves hedging long positions with put options to protect against a sudden downturn driven by recessionary fears. The current market is pricing in a 40% chance of a Fed rate cut before the end of this year, a stark contrast to the tightening bias we observed this time last year.
