US actions towards restricting the Strait of Hormuz, alongside Iranian threats, are described as supporting Brent prices. The report links this to a tighter global oil balance and faster inventory draws.
After Islamabad talks broke down, the scenario outlined includes the Strait shifting into two routes. One route could face Iranian transit or toll measures, while another could be made impassable by sea mines.
A halt to Iranian crude exports is estimated to remove 1.5–2.0 mb/d from global supply. The projected supply deficit, shown through inventory draws, rises to 7.9 mb/d in April and 6.1 mb/d in May, after allowing for rerouting, SPR releases, demand destruction, and other offsets.
Market normalisation is now placed back from late April to mid-May. Global stocks are estimated to have fallen by more than 190 million barrels since the conflict began.
Global inventories are put at about 7.9 billion barrels in total. This includes roughly 6.2 billion barrels on land and about 1.7 billion barrels at sea.
With the potential shutdown of the Strait of Hormuz, we see strong support for oil prices in the coming weeks. The conflict could remove 1.5 to 2.0 million barrels per day of Iranian crude from the market. This is happening as global inventories have already been drawn down by over 190 million barrels since the conflict began.
We believe this creates a clear opportunity to establish bullish positions on crude oil. Buying call options, particularly for May and June contracts, looks like a direct way to profit from the expected price spike. This strategy capitalises on the view that market normalisation is now delayed until at least mid-May.
Recent market action already reflects this tension, with Brent crude futures surging over 12% in the last month to trade above $115 per barrel. Implied volatility in oil options has also jumped, with the CBOE Crude Oil Volatility Index (OVX) hitting levels not seen since the conflict escalation back in late 2025. This indicates the market is pricing in significant price swings, but the supply shock points to a strong upward bias.
We’ve seen this pattern before, like the drone attacks on Saudi facilities back in 2019 which caused a temporary but sharp spike in prices. Given that roughly 20% of the world’s total oil consumption passes through the Strait of Hormuz daily, any prolonged disruption will have a much larger and more sustained impact. The current situation suggests a more severe and lasting supply deficit than those previous incidents.
The sharp tightening of the market is also creating a steep backwardation in the futures curve, where near-term contracts are much more expensive than later-dated ones. Traders should consider calendar spreads to take advantage of this structure. This involves buying the front-month contract and selling a deferred contract, profiting as the supply squeeze intensifies.
