Oil Market Reaction And Volatility
Australia’s Transport Minister Catherine King told ABC on Monday that Australia will not send ships. She said Australia has not been asked to contribute. Market prices moved slightly, with West Texas Intermediate (WTI) down 0.08% at $97.35 at the time of writing. Given the lack of commitment from allies to secure the Strait of Hormuz, we should anticipate continued or increased volatility in oil markets. The CBOE Crude Oil Volatility Index (OVX) has been trading above 55 for the past two weeks, a level we haven’t sustained since the initial phase of the conflict in late 2025. This suggests that options premiums will remain elevated, making strategies like buying straddles on oil ETFs like USO attractive to capture sharp price moves in either direction. The primary risk is a further supply constriction, as about a fifth of the world’s petroleum passes through the Strait. Recent maritime data shows tanker insurance premiums for the region have tripled in the last month, and traffic is down nearly 15%. A sustained disruption could easily push WTI prices toward the $110-$120 range, making long-dated call options a logical consideration for traders with a bullish outlook.Historical Parallel And Positioning
We must remember the price action from the initial invasion of Ukraine in 2022, when Brent crude briefly topped $130 per barrel before settling. The current lack of a unified NATO naval response creates a similar, if not more precarious, situation for global supply chains. This historical precedent suggests the current price of $97.35 has significant room to run higher if the conflict escalates further. Beyond direct energy plays, we see opportunities in hedging against broader economic fallout. Persistently high oil prices will strain transportation and industrial sectors, and we’ve seen funds increasing short positions on airline and shipping stocks. Buying put options on transportation ETFs could serve as an effective hedge against a prolonged period of expensive fuel. The geopolitical tension also reinforces the classic safe-haven trades. Gold has already seen inflows, with futures climbing 4% over the past two weeks to over $2,450 an ounce. Simultaneously, call option volume on major defense contractors like Lockheed Martin and RTX has increased, as the market anticipates more military spending regardless of how the Strait of Hormuz situation is resolved. Create your live VT Markets account and start trading now.
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