Iran’s military said the United States violated a ceasefire by firing at one of Iran’s commercial ships. It described the incident as maritime and armed robbery by the US military.
Iran’s military said it will soon respond and retaliate. No further details on timing or form of action were provided.
At the time of writing, West Texas Intermediate (WTI) was down 4.75% on the day at $87.90.
We must treat this threat of retaliation from Iran with extreme seriousness, as any disruption in the Strait of Hormuz creates immediate and significant upward pressure on oil prices. The current drop in WTI seems to be a market overreaction to unrelated demand fears, creating a clear opportunity. We believe the risk of a supply shock is not being priced in correctly.
This situation is reminiscent of the tensions we saw in late 2025, which caused a temporary 15% spike in Brent crude over two weeks. Given that over 20 million barrels of oil still pass through the strait daily, according to recent March 2026 figures from the EIA, any military action will have an immediate global impact. We should therefore be positioning for a sharp rise in oil price volatility.
The most direct strategy is to buy call options on June and July 2026 WTI and Brent crude futures. This provides upside exposure to a potential price spike while capping our risk to the premium paid. We should anticipate a rapid increase in implied volatility, making it prudent to establish these positions quickly.
We should also look at the broader market’s fear gauge, the VIX, which is currently trading near a relatively calm level of 17. Historically, geopolitical shocks in the Middle East, like the 2019 attacks on Saudi facilities, have caused the VIX to surge above 25 almost overnight. Buying VIX call options for the coming weeks is an effective hedge against a wider market sell-off triggered by an oil crisis.
This risk-off environment would likely benefit defense contractors and hurt transportation and industrial sectors that rely heavily on fuel. We can express this view by purchasing call options on defense sector ETFs. At the same time, we should consider buying put options on airline and shipping company stocks that have significant exposure to rising fuel costs.
