Iran fired on three ships in the Strait of Hormuz, and escorted two of them into Iranian waters, the Wall Street Journal reported on Wednesday. The incidents came a day after US President Donald Trump extended a ceasefire while maintaining an American blockade of Iranian ports.
Iranian media said the Islamic Revolutionary Guard Corps was taking the two ships to Iran. White House press secretary Karoline Leavitt said the seizures did not breach the ceasefire terms.
West Texas Intermediate crude was up 0.35% on the day at $92.25 at the time of writing.
We remember well the tensions from last year when Iran seized those ships in the Strait of Hormuz. That event in 2025 pushed WTI crude to over $92, creating significant market jitters that are still fresh in our minds. Today, the market’s memory of that volatility is shaping current trading strategies.
Currently, oil transit through the strait has stabilized, with recent data from the Energy Information Administration showing flows at nearly 21 million barrels per day, close to pre-crisis levels. However, diplomatic channels remain fragile, and any perceived breakdown could instantly reintroduce a risk premium into the market. This creates a deceptive calm for those watching energy prices, which are holding steady around $85 per barrel today.
Given this backdrop, we see implied volatility in oil options as unusually low, with the CBOE Crude Oil Volatility Index (OVX) hovering near 32, a sharp contrast to the peaks above 50 seen in 2025. This suggests that buying options, such as long straddles on WTI futures, could be a cost-effective way to position for a potential shock in the coming weeks. We learned from the supply disruptions of the past that the market can reprice geopolitical risk almost overnight.
Another approach is to focus on the spread between Brent and WTI crude, which is currently tight at just over $3.50 per barrel. Historically, any flare-up in the Strait of Hormuz disproportionately affects Brent, causing this spread to widen significantly, as it did in 2019 when it blew out past $7.00. We believe establishing long positions in the Brent-WTI spread offers a targeted way to trade on renewed Middle East tension.
