National Bank of Canada said an Iran conflict could disrupt oil and gas markets if key energy sites and the Strait of Hormuz are attacked. It warned that longer fighting can raise the risk of errors that lead to lasting supply shocks. It described a possible escalation involving a US strike on Kharg Island infrastructure, which handles about 90% of Iran’s oil exports. It also set out a scenario in which Iran places thousands of sea mines in the Strait of Hormuz, followed by wider attacks on energy infrastructure.

Supply Shock Timeline

It said that even if fighting stops quickly, reopening the strait could take months. It added that repairs to damaged regional infrastructure could take years. It said oil and gas price shocks could also affect sectors tied to the region and its shipping routes, including aluminium, agriculture and helium production. It stated that parties came close to this scenario but then pulled back. It noted the article was created with the help of an AI tool and reviewed by an editor. The risk of a major energy supply shock from the Middle East is significant, even though we have so far pulled back from the brink. The Strait of Hormuz remains the critical chokepoint, with recent figures showing nearly 21 million barrels of oil passing through it daily, representing about 20% of global consumption. A disruption there would be a scenario far more severe than the shipping attacks we witnessed in the Red Sea during 2025.

Market Volatility Outlook

Given the underlying tension, volatility is the key factor to watch in the coming weeks. The CBOE Crude Oil Volatility Index (OVX) has already climbed to 38 in the first quarter of 2026, reflecting the market’s growing anxiety over a potential miscalculation. This elevated volatility makes holding unhedged short positions extremely risky. A direct response is to consider long-dated call options on Brent crude futures, perhaps looking at strike prices around the $110 or $120 mark for later in the year. This strategy provides exposure to a potential price surge while defining the maximum risk to the premium paid. It is a way to position for the worst-case scenario without committing to a full futures contract. We saw during the 2025 Red Sea disruptions how quickly freight and insurance costs can spike, but a conflict affecting Hormuz would be an order of magnitude greater. Repairing bombed energy infrastructure would take years, not months, creating a long-term structural deficit in global supply. This risk is not fully priced into the current market, which is hovering around $95 per barrel. For a more capital-efficient approach, traders could implement bull call spreads. By buying a call option and simultaneously selling another at a higher strike price, the initial cost of the position is reduced. This would offer a profitable buffer if a conflict causes a sharp, but not catastrophic, rise in oil prices. The potential for a sudden de-escalation should not be ignored, although it seems less likely at this moment. A tactical, high-risk play on any peace talks could involve selling front-month futures, but this would require constant monitoring of geopolitical news flow. The danger is being caught on the wrong side of an unexpected event in a volatile environment. Beyond oil itself, we should consider the secondary impacts of a major disruption. Options on major shipping and logistics companies are worth evaluating, as their costs would soar. Likewise, sectors with high energy inputs, like aluminum and agriculture, would face significant margin pressure, creating opportunities on the short side. Create your live VT Markets account and start trading now.

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