Red Sea Shipping Risks
The conflict was stated to have started on 28 February after US-Israel strikes on Iran. Risks to trade via the Red Sea, alongside disruption tied to the Strait of Hormuz, added to supply concerns. Traders are monitoring the risk of further Houthi attacks, a possible US ground operation in Iran, and US-Iran peace talks. These events were cited as possible drivers for the next price move. WTI stands for West Texas Intermediate, a US-produced crude traded internationally and priced via the Cushing hub. It is classed as “light” and “sweet” due to low gravity and sulphur content. WTI prices are driven by supply and demand, global growth, political instability, sanctions, OPEC decisions, and the US Dollar. US inventory data from API (Tuesdays) and EIA (Wednesdays) can move prices; their results are within 1% of each other 75% of the time.Market Conditions And Trading Focus
With WTI crude holding firm, we are reminded of the market dynamics from this time last year. The conflict that began on February 28, 2025, after the US-Israel strike on Iran, provided a clear lesson in geopolitical risk. The subsequent Houthi attacks and disruptions to Red Sea shipping sent prices soaring. We watched last year as those dual threats to the Red Sea and the Strait of Hormuz ignited fears of a major supply crunch. This instability quickly pushed WTI oil past the $100 per barrel psychological barrier. The market was bracing for a test of the three-year high of $113.28 as global trade routes were threatened. Looking at the situation today, March 30, 2026, WTI is trading at a tense $94 per barrel, reflecting continued market anxiety. The latest EIA report from March 25, 2026, showed a surprise crude inventory drawdown of 2.8 million barrels, suggesting demand is outpacing supply. This is happening while OPEC+ seems committed to maintaining its production cuts through the next quarter. Given the still-elevated geopolitical risk and tightening inventories, implied volatility in oil options remains high, currently sitting near a 12-month peak of 45%. This suggests the market is pricing in significant price swings in the coming weeks. We believe traders should focus on strategies that benefit from this volatility rather than picking a firm direction. Buying long-dated call options for the June and July 2026 contracts offers a way to capture potential upside from any new supply shocks while limiting downside risk. However, due to high premiums, bull call spreads may be a more cost-effective strategy to profit from a moderate move higher. These strategies allow for participation if tensions escalate again, mirroring the rapid price run-up we witnessed in 2025. Create your live VT Markets account and start trading now.
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