Strait Of Hormuz Supply Risks
Reports said Iran was drafting a protocol with Oman to manage traffic through the Strait of Hormuz. This was described as lowering the chance of a full shutdown, but implying managed restrictions rather than a full reopening. President Trump issued threats to destroy Iran’s power plants and bridges unless the Strait of Hormuz reopens by his Tuesday deadline. A base case was set out for Brent to ease towards USD85–70 over the next 6–12 months, despite near-term supply risks. The article was produced using an AI tool and reviewed by an editor. We saw Brent pull back from those highs near $119 last year, but any belief that the US-Iran situation is resolved looks premature. Even now, with Brent crude hovering around $94 a barrel, a significant risk premium is clearly priced in. The so-called managed restrictions in the Strait of Hormuz, which we first saw emerge from those Iran-Oman talks in 2025, have become the tense new normal.Options Strategies For Volatile Oil
About a fifth of the world’s daily oil consumption still needs to pass through that chokepoint, a fact that hasn’t changed. Current tanker flow data from early April 2026 shows transit volumes remain about 12% below the levels seen before the 2025 escalation. This sustained disruption is why prices haven’t returned to the sub-$80 levels some had expected. This environment of controlled disruption keeps implied volatility elevated for front-month contracts. Considering the memory of last year’s rapid spike, buying out-of-the-money call options is a viable strategy to position for any sudden flare-up. This offers a capped-risk way to profit if President Trump’s past threats were to become a renewed reality. Conversely, the potential for a sudden diplomatic breakthrough, however slim, cannot be ignored. If the long-term view of supply fundamentals eventually pushes prices back towards the $70-85 range, the current premium would evaporate quickly. Therefore, protective puts or bear put spreads could be a prudent hedge against a sharp drop on any good news. We are caught between the risk of short-term supply shocks and the longer-term possibility of price normalization. Strategies that benefit from price swings in either direction, such as long straddles, should be considered for the coming weeks. This allows traders to capitalize on the uncertainty itself without betting on a specific direction. Create your live VT Markets account and start trading now.
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