WTI rose for a third day and reached a two-week high in Monday’s Asian session. It traded near $102.30, up 1.35%, with attention on $102.50.
US-Iran tensions added to supply concerns after Donald Trump posted a warning to Iran on Truth Social. The Times of Israel said on Saturday that Israel and the US were advancing military preparations for possible joint attacks on Iran.
US-Iran talks remain stalled over Tehran’s nuclear programme. The report also cited a US blockade of Iranian ports and an effective closure of the Strait of Hormuz, adding to fears of disruption after a rebound from sub-$87.00 monthly lows.
A firmer US Dollar could limit further gains because Oil is priced in Dollars. The USD Index (DXY) reached its highest level since 7 April, helped by expectations of a US Federal Reserve rate rise in 2026.
WTI stands for West Texas Intermediate and is a US-sourced “light” and “sweet” crude, distributed via Cushing. Prices are shaped by supply and demand, geopolitics, OPEC quota decisions, and weekly inventory data from API on Tuesdays and EIA the next day; the two results fall within 1% of each other 75% of the time, and EIA is seen as more reliable.
Given the rise in WTI towards $102.50, we see the market primarily focused on supply-side risks from the Middle East. Any escalation in Iran tensions directly threatens the Strait of Hormuz, a chokepoint through which roughly 21% of global petroleum liquids consumption passes daily. For derivative traders, this geopolitical premium suggests a bullish bias in the short term.
We should be watching inventory data very closely, as it will confirm whether demand is holding up. Last week, the Energy Information Administration (EIA) reported a surprise crude oil draw of 3.1 million barrels, signaling strong underlying consumption. Another draw this week would add fuel to the rally and likely clear the path for a test of higher levels.
Positioning for a potential price spike can be done through call options. Buying out-of-the-money calls, such as the July $105 or $110 strikes, provides exposure to further upside while defining risk to the premium paid. This is a straightforward way to trade the view that geopolitical headlines will worsen before they improve.
However, we must consider the strong US dollar as a significant headwind for oil prices. The market’s expectation for a Fed rate hike this year, a view that has been building since the hawkish policy stance of 2025, is keeping the dollar elevated. This could mute the rally or cause a sharp reversal if tensions suddenly de-escalate.
Given the elevated implied volatility, a bull call spread might be a more prudent strategy for some traders. This would involve buying a lower-strike call and selling a higher-strike call to finance some of the purchase, capping potential gains but lowering the upfront cost. This approach benefits from a steady rise in oil prices without needing a dramatic breakout.
We remember how quickly markets reacted during the geopolitical events of early 2022, when prices surged over $130 per barrel in a matter of weeks. The current situation with Iran carries a similar potential for a rapid, headline-driven move. Therefore, having some form of bullish exposure seems warranted for at least the next few weeks.
