The United States blockade in the Strait of Hormuz continued, with no progress towards another round of peace talks. President Trump ordered the US Navy to shoot at any boat laying mines, and the US military reported intercepting two oil supertankers trying to evade the blockade.
The policy focus remained on the Strait of Hormuz and on pressuring Iran to change its position. The closure was linked to rising oil and input costs, with risks of higher crude prices and greater financial market volatility.
Inflation Scenario And Oil Price Assumptions
A scenario using an average crude oil price of USD 115pbl in Q2 projected annual inflation at around 3.6% in Q2, rising to 3.8% in Q3 and Q4 this year. It also stated that refined fuel and fertiliser prices could push inflation above these estimates.
The situation was described as having global inflation effects, including in Europe. The European Central Bank and the Bank of England were expected to act faster than the Federal Reserve, with implications for US dollar performance if equity market resilience continues.
Looking back at the US blockade of the Strait of Hormuz in 2025, we saw the predicted inflation shock materialize as crude oil prices surged. That surge has left its mark, with recent data showing US inflation remains stubbornly high at 3.5% as of March 2026, well above the central bank’s target. This persistent price pressure, born from last year’s energy crisis, continues to be the dominant factor for markets.
For energy derivatives, the focus should be on managing volatility now that Brent crude has settled around $90 per barrel, down from the highs seen during the 2025 blockade. Given the lingering geopolitical risk, buying call spreads on WTI or Brent offers a cost-effective way to position for another potential spike. We believe outright long positions are risky, but options allow traders to capitalize on price swings while defining their risk.
Dollar Rates And Derivatives Implications
The US dollar’s performance has been complex, just as we anticipated last year. The European Central Bank and Bank of England did act more swiftly than the Federal Reserve in 2025, which initially weakened the dollar and sent EUR/USD toward 1.10. However, with US inflation proving stickier than in Europe, traders should now consider positions that bet on a stronger dollar, as the Fed may be forced to delay rate cuts longer than its counterparts.
This environment is ideal for interest rate derivative strategies. The market has drastically reduced its expectations for Fed rate cuts in 2026, a direct consequence of the inflationary wave from last year’s events. We see opportunities in options on SOFR futures, positioning for a “higher for longer” rate scenario. Watch the MOVE index, as bond market volatility is likely to increase ahead of upcoming Fed meetings.
