WTI, the US crude oil benchmark, traded near $93.65 in Asian hours on Monday. Prices edged up as transit through the Strait of Hormuz remained severely restricted and US–Iran talks stalled.
Iran reportedly sent the US a proposal to reopen the Strait of Hormuz and extend a ceasefire, via Pakistani mediators. It was unclear whether the White House would consider the plan, while concerns about supply disruption supported prices.
Geopolitical Tensions Drive Oil Prices
On Sunday, President Trump told Jared Kushner and Steve Witkoff to skip a trip to Pakistan and said Iran “offered a lot, but not enough”. Iran’s President Masoud Pezeshkian said Iran would not enter “imposed negotiations under threats or blockade”.
Traders awaited the American Petroleum Institute (API) inventory report due on Tuesday. A larger-than-expected draw can point to stronger demand, while a larger build can suggest weaker demand or excess supply.
WTI stands for West Texas Intermediate and is one of three major crude types, alongside Brent and Dubai. It is described as “light” and “sweet”, is sourced in the US, and is distributed via the Cushing hub.
WTI prices are driven by supply and demand, the US dollar, geopolitical risk, sanctions, and OPEC decisions. API data is published every Tuesday and EIA data the next day, with results within 1% of each other 75% of the time; the EIA is seen as more reliable. OPEC has 12 members, while OPEC+ adds ten non-OPEC members, including Russia.
Options Strategies For Elevated Volatility
The current WTI price near $93.65 is driven entirely by geopolitical fear, not just fundamentals. This level of uncertainty means we should expect significant price swings in the coming weeks. For derivative traders, this translates to elevated implied volatility, making option strategies particularly relevant.
We are looking at the potential for a severe supply shock, as nearly 21 million barrels of oil pass through the Strait of Hormuz daily, representing about 21% of global petroleum liquids consumption. A strategy to consider is buying out-of-the-money call options, such as the June $100 or $105 strikes, to profit from a potential price spike if talks collapse completely. This approach offers a defined risk limited to the premium paid.
Conversely, a surprise breakthrough in negotiations could send prices tumbling back toward the low-$80s range we saw for much of 2025. To prepare for this, purchasing put options can serve as a hedge against long positions or as a direct bet on a peaceful resolution. The high volatility, with the CBOE Crude Oil Volatility Index (OVX) recently pushing above 40, means these options are expensive, so traders might look at put spreads to reduce the initial cost.
Given the binary nature of the geopolitical outcome, we believe a good strategy is to trade the volatility itself. Buying a straddle, which involves purchasing both a call and a put option with the same strike price and expiration, could be profitable if the price moves sharply in either direction. This is especially relevant heading into this week’s API inventory report, which could act as a catalyst for a major price move.
We remember the price volatility back in 2025 when OPEC+ surprised the market with production cuts, causing a short-term spike before demand concerns took over. The current situation feels similar, where news headlines are the primary driver, not underlying demand which has been moderate according to recent EIA data showing only modest inventory draws. Therefore, any positions we take must be nimble, as a single news report could erase gains.
