TD Securities strategists Ryan McKay and Daniel Ghali explain how Middle East tensions—and different outcomes involving Iran—could change oil pricing. Using 75 years of data on geopolitical risk premia, they lay out paths that range from extra supply (lower prices) to Brent rising above $100–$120/bbl if risk premia stay elevated. In a “New Deal,” successful US-Iran talks could ease sanctions and reroute commodity flows, which would likely push energy prices down. In a “Clean Break,” a quick intervention that leads to regime change could cause an initial jump, but risk premia could fade if energy infrastructure is not damaged. In “Unilateral Action,” Iran or Israel acts alone. That raises fears about the Strait of Hormuz or a broader war. TD Securities expects an initial $5–$10/bbl spike, similar to moves seen around the Twelve Day War. In an “Expanded US Conflict,” a wider US-Iran fight increases risks to the regime and raises the chance of a Strait of Hormuz disruption. Even if any disruption is brief, prices could spike by about +$15/bbl. “Domestic Action” that hits Iranian energy infrastructure could reduce supply and exports, with a roughly +$10/bbl spike. In “Regional escalation,” a wider conflict could threaten infrastructure outside Iran. That could add at least +$25/bbl and lift prices above $100–$120/bbl. After recent failed diplomacy in Geneva and skirmishes near the Strait of Hormuz, markets are pricing meaningful uncertainty. Brent is hovering near $88 per barrel. The CBOE Crude Oil Volatility Index (OVX) has climbed to 35, its highest since last fall. This backdrop calls for strategies that can handle a wide range of outcomes in the coming weeks. One possibility is a “New Deal” with Iran, which could bring a large amount of oil back to market quickly. To hedge this bearish outcome, buying out-of-the-money puts on April or May contracts could be a low-cost option. Based on tanker-tracking data from late 2025, we estimate Iran could raise exports by more than 1.5 million barrels per day within a quarter—enough to overwhelm current demand forecasts. On the other hand, the risk of “Unilateral Action” by Iran (or its proxies) and Israel remains high and could trigger a sudden spike. Long call spreads can be a sensible way to position for a $5 to $10 jump while limiting downside. This mirrors what happened in October 2025, when a temporary Red Sea disruption sparked a sharp but short-lived rally before fundamentals reasserted themselves. A more severe “Regional Escalation” that threatens energy infrastructure beyond Iran would likely create a major price shock and push Brent well above $100 per barrel. In that scenario, far out-of-the-money calls—such as $110 or $120 strikes—could act like a lottery-ticket trade with large upside. The latest EIA figures show nearly 21 million barrels of oil move through the Strait of Hormuz each day, so even a hint of a prolonged closure could exceed the supply shocks seen in 2022. Because the next major move could be up or down, trades that benefit from volatility itself may be appealing. A long straddle—buying a call and a put at the same strike—can profit from a big move in either direction. That fits the current environment, where the outcome could be either a supply surge from a new deal or a supply shock from a new conflict.

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