Brent crude traded near $110 a barrel after rising 1% at the start of Monday trading. Prices were only slightly below the $120 level reached last month. Ongoing hostilities in the Middle East have disrupted regional energy infrastructure and production. The closure of the Strait of Hormuz was described by the International Energy Agency as the biggest supply disruption in the history of the market.

Opec Plus Output And Market Disruptions

OPEC+ increased production quotas for May while war conditions constrained output and shipments for several of its largest members. Oil prices continued to reflect large disruptions. OPEC+ said damage to Middle East energy infrastructure could keep supply tight even after the conflict ends. The report stated the article was created with the help of an artificial intelligence tool and reviewed by an editor. With Brent crude holding near $110 a barrel, we see the market reflecting a significant supply risk premium due to ongoing Middle East hostilities. The recent high of $120 shows that traders are pricing in the severity of infrastructure attacks and the closure of the Strait of Hormuz. This persistent tightness suggests that positioning for continued price strength or high volatility is the primary consideration for the weeks ahead. The scale of the supply shock is immense, with the International Energy Agency confirming a global supply deficit now exceeding 3 million barrels per day for March 2026. This is largely because the Hormuz closure has taken nearly 21 million barrels per day of crude transit offline, a figure that dwarfs the recent 400,000 barrel per day quota increase from OPEC+. Given this imbalance, we believe any dips in price will likely be viewed as buying opportunities.

Derivatives Strategies In Elevated Volatility

For derivatives traders, this environment supports maintaining long positions through call options or futures contracts targeting strike prices above the recent $120 high. The Cboe Crude Oil Volatility Index (OVX) is currently elevated near 60, making options expensive but also reflecting the potential for sharp upward price movements. A cost-effective strategy could involve bull call spreads to limit premium outlay while capturing further upside. The structure of the futures market further validates this bullish outlook, as the Brent curve is in steep backwardation, with front-month contracts trading at a significant premium to later-dated ones. This indicates a powerful, immediate demand for physical barrels that is unlikely to fade soon. We view this as a strong signal that the supply squeeze is real and will persist through the second quarter. We have seen how long these disruptions can last, looking back at the market realignment following the sanctions on Russian energy in 2022. The damage to regional infrastructure suggests this is not a short-term political issue but a long-term logistical problem. Therefore, strategies should be structured for a multi-week or even multi-month horizon, as a return to market balance seems distant. Create your live VT Markets account and start trading now.

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