Oil prices rose after US-Iran talks ended without agreement. ICE Brent climbed more than 9% in early trade and NYMEX WTI moved above $105/bbl.
The US military plans a blockade on maritime traffic entering and leaving Iranian ports from 10:00am Monday Washington time. Ships not calling at Iranian ports would still be allowed to transit the Strait of Hormuz.
Energy Markets React To Escalating Tensions
European gas prices also increased, with front-month TTF futures up nearly 18% to intraday highs above EUR51/MWh. The conflict is now in its sixth week, adding to concerns about near-term supply.
Speculative positioning shifted in different ways across benchmarks. Net long positions in ICE Brent fell by 5,583 lots to 424,270 lots, including a 4,525-lot drop in gross longs.
In NYMEX WTI, net longs rose by 7,121 lots to 137,838 lots over the week. The figures were reported as of last Tuesday.
US drilling activity remained steady, with the oil rig count unchanged at 411 as of 10 April, according to Baker Hughes. Total rigs fell by three to 545, which is 38 rigs fewer than a year earlier.
Opec Report In Focus
Markets are also watching for OPEC’s monthly report due later on Monday. The report is expected to update supply balance guidance.
With oil prices already spiking above $105, the most immediate play is on volatility itself, which is set to explode. We should consider buying straddles or strangles on front-month contracts, as this allows for profit from a massive price swing in either direction. The cost of options will be high, but the risk of a sudden de-escalation is just as real as the threat of a full-blown conflict.
The divergence between Brent and WTI futures presents a clear spread opportunity for us. Since a US blockade directly threatens seaborne crude from the Persian Gulf, the premium for Brent should widen significantly against the more land-locked WTI. This is especially true when we remember that nearly 21 million barrels of oil pass through the Strait of Hormuz daily, making this a global, not just an Iranian, supply threat.
For those with a directional view, buying May and June call options on Brent seems prudent, even at these elevated prices. This move feels similar to the initial shock we saw back in early 2022 after the invasion of Ukraine, which sent prices soaring. Using call spreads, where we buy a call and sell a higher-strike call, could be a cheaper way to position for further upside while limiting our initial cost.
The supply fundamentals support a bullish stance in the near term, as a blockade could immediately remove over 1.5 million barrels per day of Iranian crude from the market. We can’t expect a rapid US supply response to fill that gap, especially with the US rig count stuck at 411, a stark contrast to the nearly 600 rigs we saw operating back in early 2025. This limited spare capacity in the system means any disruption will have an outsized price impact.
This situation builds on the market fragility we observed last year with the Houthi disruptions in the Red Sea, which already added a risk premium to crude. The parallel surge in European natural gas prices shows this is a broad energy security crisis, not just an oil market event. We must therefore remain nimble, as headlines from Washington or Tehran could cause violent price swings with very little warning.
