Market focus remains on ship movements through the Strait of Hormuz as a measure of oil supply risk. Ceasefire uncertainty has kept price swings elevated after Iran and the US exchanged fire, and the UAE was hit by missile attacks, with no further escalation reported today.
In the US, Senate Republicans are drafting a military authorisation that could allow renewed strikes on Iran if hostilities resume. Under the War Powers Act, it could receive expedited Senate consideration within the first 30 days of renewed conflict.
Strait Of Hormuz Supply Signals
The draft plan is expected to limit the use of ground troops and set a fixed timeframe for any operation. It follows President Trump’s statement that the initial phase of conflict has ended, amid renewed tension linked to control of the Strait of Hormuz.
Even with these risks, Brent and WTI are trading lower. Omani and Dubai oil benchmarks are rising.
We are watching for signs of supply relief, remembering how last year’s focus was almost entirely on tracking ships through the Strait of Hormuz. The doubts about the ceasefire in early 2025, which saw an exchange of fire between the U.S. and Iran, set the stage for the heightened volatility we still see today. That period taught us that any disruption in this critical chokepoint directly impacts market sentiment.
In the coming weeks, traders should keep a close eye on transit volumes, which have stabilized but remain fragile. Recent data from the Energy Information Administration (EIA) shows that tanker traffic through the Strait is currently hovering around 19 million barrels per day, still below the pre-2025 average of over 20 million. This persistent shortfall indicates the market has not fully priced out the supply risk from the region.
Key Market Signals To Watch
The CBOE Crude Oil Volatility Index (OVX) is a key metric for us right now, sitting around 35, which is well below the peaks seen during last year’s tensions but still significantly above the long-term average in the low 20s. This suggests that while outright panic has subsided, the cost of options remains high, presenting opportunities for premium-selling strategies. Traders could consider selling puts on dips or writing covered calls on existing long positions in oil-related assets.
We should also continue to monitor the spread between Brent and Dubai crude benchmarks. That spread widened dramatically during the 2025 conflict scare but has since narrowed, signaling a slight easing of Middle East-specific risk. However, it has not returned to historical norms, meaning positions that bet on this spread tightening further could be profitable if diplomatic channels show progress.
The political risk remains a wildcard, especially after the proposed Senate military authorization of 2025 established a framework for expedited action. Although that draft never became law, its existence means any new flare-up in tensions could escalate much faster than before. We must therefore watch for any renewed hawkish rhetoric from Washington or Tehran, as this would be a primary catalyst for a sharp move in prices.
