Brent crude rose back above $100 per barrel amid rising geopolitical risk. The move comes before a War Powers Resolution vote on 29 April linked to Operation Epic Fury.
The vote will decide whether the operation moves into an unauthorised phase. The 60-day constitutional limit is due to end on 1 May.
Geopolitical Risk Drives Brent Above One Hundred
US actions are focused on keeping operational freedom beyond that date. Risks cited include a dual blockade in the Strait of Hormuz and stalled Pakistan-mediated US–Iran ceasefire talks.
Market pricing reflects the chance of a drawn-out conflict that could keep 20% of global oil supply under threat. It also reflects the possibility of a diplomatic route before a Trump–Xi summit in China in mid-May.
With Brent crude back over $100 per barrel, we see the market pricing in significant geopolitical risk. The immediate focus is the War Powers Resolution vote on April 29, which will determine if Operation Epic Fury continues, directly impacting the dual blockade threat. This creates a binary event for traders, where the outcome will likely cause a sharp price move in either direction.
Implied volatility has surged, with the oil volatility index, or OVX, hitting 55, a level not seen since the major supply disruptions of 2022. This indicates the options market is anticipating daily price swings of $4 to $5 per barrel over the next month. Buying options is therefore expensive, so traders should consider strategies like call spreads to bet on higher prices while capping costs.
Positioning And Hedging Into The Vote
The potential blockade of the Strait of Hormuz puts nearly 21 million barrels per day, or 20% of global supply, at risk. We can look back to the 1990 Gulf War, when a similar supply threat caused crude prices to more than double in just over two months. This historical precedent validates the market’s current anxiety and the high premium baked into prices.
In the derivatives market, we are seeing a record skew towards upside calls, meaning bullish bets are far outpacing bearish ones. The price for a $120 call option for June delivery is now at its highest premium over a $90 put in three years. This shows that while traders are positioned for a price spike, the trade is becoming crowded and vulnerable to a sharp reversal.
While preparing for a prolonged conflict, we must also account for a potential diplomatic off-ramp, especially with the presidential summit in mid-May. A surprise de-escalation ahead of the May 1st deadline could rapidly pull the risk premium out of the market. Traders holding long positions should therefore have clear targets for taking profits or use protective puts to guard against a sudden peace dividend.
