Iran, using Pakistani mediators, has proposed a deal to the US that would focus first on reopening the Strait of Hormuz and ending the war. Nuclear talks would be delayed to a later stage to avoid internal disagreements in Iran over nuclear concessions.
Iranian Foreign Minister Abbas Araghchi has held talks in Pakistan and Oman, with more discussions expected in Moscow. The US has not yet responded to the proposal.
Market Setup And Diplomatic Timeline
Under the plan, the US blockade would be lifted first. This could reduce US leverage over Iran’s uranium stockpile and any suspension of enrichment.
Oil price forecasts are rising as disruption to energy supply continues. Brent staying above $90 per barrel through to the end of 2026 is increasingly seen as a consensus.
Given the Iranian proposal, we are at a pivotal moment where the high geopolitical risk premium in oil could either solidify or rapidly unwind. The U.S. has not yet responded, creating significant uncertainty that we must navigate in the coming weeks. For now, the consensus view that Brent will remain above $90 per barrel holds, but this new diplomatic channel introduces a clear downside risk.
With June Brent futures trading around $92.50, the market is pricing in continued disruption from the blockade that began in 2025. This stoppage effectively choked off nearly 20 million barrels per day from easy transit, a supply shock that reminded us of the volatility seen after the 2022 invasion of Ukraine. We should therefore consider holding long positions through call options, betting that the Trump administration will prioritize nuclear leverage over a quick deal.
However, a surprise U.S. agreement would cause prices to fall sharply as the Strait of Hormuz reopens. To prepare for this less likely but high-impact event, we could purchase cheap, out-of-the-money put options as a hedge. This strategy would protect our portfolio from a sudden dovish shift in U.S. policy toward Iran.
Positioning For A Range Break
The elevated implied volatility in crude options indicates the market is bracing for a significant move, and last week’s EIA report of a larger-than-expected inventory draw only reinforces the current supply tightness. We must closely watch for any official statements from Washington or Tehran, as these will be the primary catalyst for oil’s next major price direction. A decisive response either way will likely move the market well beyond its current trading range.
