WTI, the US crude oil benchmark, traded near $65.70 in early European trading on Monday, slipping below $66.00. Prices fell as US-Iran talks are set to resume later this week, and as markets await the American Petroleum Institute (API) report due on Tuesday.
The next round of negotiations is expected in Geneva on Thursday. Iran’s Foreign Minister Abbas Araghchi said on Sunday that a diplomatic solution is likely and that a deal is within reach.
Geopolitical Risk And Supply Disruption
Traders also pointed to rising tensions between the two countries and the risk of supply disruptions. US President Donald Trump said last week that “bad things” would happen to Iran if there is no deal on Iran’s nuclear program.
Tariffs also added to concerns about weaker oil demand. The US Supreme Court ruled Trump’s broad tariffs illegal. Trump then introduced a new 15% tariff on Saturday, saying on Truth Social that it would take effect immediately and that more tariffs would follow.
As of February 23, 2026, the market shows a familiar pattern in West Texas Intermediate, now trading around $78 a barrel. The same dynamic seen in 2025—geopolitical supply risks clashing with economic demand worries—is playing out again. This mix is driving sharp swings in price and creating opportunities in derivatives markets.
On the supply side, traders are watching renewed tensions in the Strait of Hormuz, especially after last month’s drone incident. Nearly one-fifth of the world’s oil supply moves through this chokepoint, so any disruption could push prices sharply higher. This risk can make call options appealing, either as a hedge or as a way to position for escalation.
Demand Headwinds And Volatility Strategy
At the same time, fears of slower global demand remain a major headwind. Recent data showed Eurozone GDP growth of just 0.1% in Q4 2025. In the US, the Federal Reserve’s preferred inflation measure for January 2026 came in a bit higher than expected at 2.8%, suggesting interest rates may stay higher for longer. Weaker consumption could limit upside in oil and can support strategies such as buying put options.
With these forces pulling in opposite directions, implied volatility has been rising. That makes strategies that benefit from large moves—such as long straddles—worth considering. Prices could break strongly in either direction in the coming weeks. Weekly API and EIA inventory reports remain key short-term catalysts and may trigger sharp, tradable moves.
Create your live VT Markets account and start trading now.
here to set up a live account on VT Markets now
