Brent crude saw wide price moves linked to Iran tensions and changing status updates on the Strait of Hormuz. Prices reacted to ceasefire headlines and shifting expectations for shipping through the strait.<\/p>\n
Over the week, markets rose as hopes grew for a resolution between Iran and the US. On Friday, Iran\u2019s Foreign Minister said the Strait of Hormuz would be open for the remaining period of the ceasefire.<\/p>\n
That message was reversed in under a day on Saturday, with Iran stating the strait was shut. Shipping through the strait picked up on Saturday but then stopped again.<\/p>\n
Brent crude fell -5.06% last week to $90.38\/bbl, after a -9.07% drop on Friday, marking its lowest close since March 10. On Monday morning, Brent rose +5.61% to $95.45\/bbl.<\/p>\n
On Friday afternoon in London, Polymarket put the chance of Strait traffic returning to normal by end-May at 84%. That later fell to about 63%, near last Thursday\u2019s level, but above the 37% level priced at the same time the prior week.<\/p>\n
The market is experiencing extreme whiplash, as we saw Brent crude prices collapse over 9% on Friday only to surge nearly 6% this morning to $95.45. This price action is tied directly to conflicting headlines from Iran about the Strait of Hormuz. We must accept this headline-driven volatility as the new normal for the immediate future.<\/p>\n
The risk is not theoretical, as about 20% of the world’s total oil consumption passes through the strait daily. This reality is reflected in the derivatives market, where the CBOE Crude Oil Volatility Index (OVX) has jumped to over 45, its highest level this year, indicating traders are bracing for wild price swings. This makes outright positions dangerous and suggests a move towards strategies that can manage volatility.<\/p>\n
Given the binary nature of the risk\u2014the strait is either open or closed\u2014we believe traders should consider using options to define their risk. Buying call spreads could offer a capped-risk way to bet on further escalation, while put spreads could be used to position for a sudden resolution. The high implied volatility makes selling options tempting, but the risk of a sudden gap in prices is too great.<\/p>\n
The Polymarket odds, which fell from 84% to 63% for a May resolution, show just how quickly sentiment can turn. We are essentially trading geopolitical announcements, meaning any position requires constant monitoring. This environment favors short-term tactical trades over long-term convictions until there is more clarity from Iran.<\/p>\n
Adding to the tension, the broader market has a very thin buffer against a real supply shock. OPEC+ has signaled it is monitoring the situation but has not committed to releasing spare capacity. Furthermore, we note that U.S. strategic petroleum reserves are near 40-year lows, limiting the ability to soften the blow of a prolonged outage.<\/p>\n
We saw similar, though less intense, situations in 2019 with tanker seizures that kept the market on edge for months. This historical precedent suggests that even if the immediate crisis fades, elevated tension and volatility are likely to persist. Therefore, maintaining a long volatility bias in portfolios seems prudent for the coming weeks.<\/p>\n","protected":false},"excerpt":{"rendered":"
Brent swung on Iran-Hormuz headlines; ceasefire hopes lifted prices, then reversal shut strait, disrupting shipping.<\/p>\n","protected":false},"author":38,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[46],"tags":[],"class_list":["post-45411","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":[],"aioseo_notices":[],"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"josephine","author_link":"https:\/\/www.vtmarketsglobal.com\/en\/author\/josephine\/"},"_links":{"self":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/45411","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/users\/38"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/comments?post=45411"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/45411\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=45411"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=45411"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=45411"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}