Rabobank strategist Michael Every changed the firm’s base case on the Iran conflict to a longer closure of the Strait of Hormuz. The scenario assumes a shutdown lasting 2–4 weeks, with ongoing disruption to oil flows and higher physical oil prices in Asia.

The note describes a high risk that attempts to end tensions could instead trigger further escalation. It says this could lead to more damage to energy supply during the period of closure.

The report refers to a US economic blockade of Iran and an Iranian blockade of Hormuz. It adds that the US plans to ramp up Operation ‘Economic Fury’ at sea and through sanctions, while Iran says it would use force to break any continuing blockade.

Rabobank says screen oil prices fell only slightly after a US ceasefire extension. It adds that physical oil and product prices in Asia are expected to keep rising unless Hormuz reopens.

The analysis compares a possible geopolitical shift to the 1956 Suez Crisis. It says different outcomes could affect energy prices and wider asset markets in different ways.

Our new base case is a closure of the Strait of Hormuz for two to four weeks, which will disrupt the flow of a significant portion of the world’s oil. With over 20 million barrels per day passing through this choke point, or about 20% of global daily supply, any extended blockage will directly drive crude prices higher. We need to position for a sustained period of supply disruption.

This points to a significant repricing of risk, meaning options premiums are likely undervalued. We should be looking at buying call options or call spreads on Brent crude, as it is more directly exposed to Middle Eastern supply routes than WTI. The CBOE Crude Oil Volatility Index (OVX) has already jumped to over 50, and we anticipate it will climb further as the risk of military escalation remains high.

Be aware that screen prices for oil futures may not reflect the severity of the physical market, especially in Asia. The premium for physical barrels is widening, indicating that immediate supply is much tighter than futures contracts currently suggest. This divergence presents opportunities for those trading physical-to-futures spreads.

The situation is developing into a geopolitical earthquake on par with the 1956 Suez Crisis. During that crisis, the blockage of a key waterway caused a dramatic and sustained spike in energy prices that rippled through the global economy. This historical parallel implies we should consider downside protection on broader equity indices, as a severe energy shock will hit global growth.

The risk of military escalation to break the blockade is very high, creating an unstable trading environment. Any headlines suggesting direct naval conflict could cause extreme, sudden moves in oil and other asset prices. Holding short volatility positions is incredibly risky until there is a clear path to de-escalation.

When we look back at the minor shipping disruptions we saw in late 2025, they caused temporary price spikes of 5-7% over a couple of days. The current scenario is far more severe and prolonged, suggesting a much larger and more sustained market reaction is warranted. This is not a short-term event to be ignored.