WTI crude fell by over 3% on Monday. It opened near 100.00 and ended below 95.00 per barrel after selling off through the session. Last week’s price spike rose above 113.00 after panic buying. Since that high, prices have posted a run of lower daily closes, though levels remain well above where they were before the Strait of Hormuz closure.

Geopolitical Shock And Supply Disruption

The Strait of Hormuz closure followed a US-Israeli military operation against Iran. The closure removed an estimated 20% of global seaborne oil supply, driving a near-vertical rise from the mid-February breakout near 65.00. There is no clear timetable for reopening, and tanker re-routing is adding days to delivery schedules. Reports say the White House is considering a coordinated release from the Strategic Petroleum Reserve (SPR), which has added mild downward pressure. High prices are also raising concerns about weaker demand, especially in Asia. China’s National Development and Reform Commission plans to draw down state reserves instead of buying spot, while India is speeding up talks with Middle Eastern producers outside the strait corridor. Looking back at the Strait of Hormuz closure in 2025, we remember how quickly WTI crude spiked from $65 to over $113 per barrel. That event fundamentally changed market psychology, embedding a significant risk premium that persists today even with prices currently hovering near $82. The memory of that volatility means any new geopolitical tension in the Middle East will likely trigger an outsized market reaction.

Options Market Signals And Trading Approach

This market memory is reflected in current options pricing, with the CBOE Crude Oil Volatility Index (OVX) sitting at an elevated 35, well above its pre-2025 average. This suggests traders are still willing to pay a premium to protect against another sudden supply shock. For derivative traders, this elevated implied volatility presents opportunities to sell options if we believe the market will remain range-bound in the coming weeks. On the supply side, the market appears tightly balanced, leaving little room for error. OPEC+ confirmed last week they will maintain current production quotas through the second quarter, while recent EIA data shows U.S. shale output growth has slowed to just 1.5% year-over-year. This constrained supply picture provides a firm floor under prices and makes the market highly sensitive to any disruption. Simultaneously, demand concerns are putting a ceiling on prices, much like they did during the peak of the crisis last year. The IMF recently revised its 2026 global growth forecast down to 3.0% from 3.2%, citing weakness in Europe and parts of Asia. We are seeing this reflected in softer import numbers from key emerging markets, limiting the potential for a major price rally without a new catalyst. Given these opposing forces, a viable strategy involves selling premium through strategies like iron condors, capitalizing on the view that oil will trade within a defined range, perhaps between $75 and $90. The lesson from last year’s spike, however, suggests holding some cheap, long-dated call options as a hedge. This protects against the low-probability but high-impact risk of another sudden supply disruption. Create your live VT Markets account and start trading now.

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