Supply Disruption Risks
Al-Kaabi said that even if the conflict ended immediately, Qatar would need “weeks to months” to return to normal delivery cycles. US Energy Secretary Chris Wright said the US Navy would escort ships as soon as reasonably possible and that prices should fall in weeks rather than months. Federal Reserve Governor Christopher Waller said petrol prices may spike but this is unlikely to cause lasting inflation. He said a longer period of higher energy prices could create wider issues. After a Senate vote on Wednesday, the US House rejected a measure on Thursday to limit President Donald Trump’s ability to take further military action against Iran. Trump said Iranian officials had reached out to seek an agreement, while Iran’s Foreign Minister Abbas Araghchi said Iran had not asked for a ceasefire and had rejected talks with the US. We recall how the crisis in the Middle East last year sent WTI crude soaring by 26% in a single week. That event serves as a critical reminder that geopolitical flare-ups remain the most potent catalyst for sharp, unexpected moves in energy markets. The memory of that volatility should anchor every strategy we consider in the coming weeks.Trading Strategies For Volatility
Currently, the market feels deceptively stable, but fundamentals point to underlying tightness. The latest Energy Information Administration (EIA) report shows U.S. crude oil inventories have drawn down by 3.7 million barrels, tighter than analysts expected. With OPEC+ signaling it will maintain its production cuts through the next quarter, any disruption to supply could have an outsized impact on price. Given this backdrop, traders should look at volatility as an asset class to be traded. Buying long-dated call options on WTI or Brent futures offers a defined-risk way to position for a sudden price spike, similar to the one we saw unfold in 2025. We can look at the CBOE Crude Oil ETF Volatility Index (OVX), which jumped over 40% during past conflicts, as a benchmark for how quickly the price of insurance can rise. We must also respect the potential for rapid reversals, just as the US Energy Secretary predicted last year, even if his timing was off. History shows that war-related price spikes can collapse on news of a ceasefire or a release from strategic reserves. For this reason, using put spreads to bet on a downturn or selling covered calls against existing long positions can provide a valuable hedge against a sudden thaw in tensions. The political rhetoric from last year, with conflicting statements from US and Iranian officials, is a lesson in itself. We should treat official statements with caution and focus on verified actions, such as naval movements or changes in oil tanker flows. The historical pattern, from the Gulf War in 1990 to the events of 2022, shows that the market ultimately responds to barrels actually removed from supply, not just threats. Create your live VT Markets account and start trading now.
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