Oil prices have risen, with Brent moving up as the Iran war disrupts energy supply. Oil and gas markets are being used as indicators of wider market conditions.
The International Energy Agency says the global natural gas market is expected to stay tight for at least two more years. The war is also delaying the LNG expansion that had been expected.
Supply Disruptions And Market Impact
The conflict has removed around one-fifth of global oil and LNG supply. Damage to Qatari facilities has reduced liquefaction capacity and may take years to repair, delaying new supply growth led by the US.
The IEA estimates a cumulative shortfall of around 120 billion cubic metres between 2026 and 2030. This points to continuing tight conditions over that period.
Gas demand has softened in key importing regions, especially in Asia. Higher prices and policy measures are driving fuel switching and lower consumption.
Oil remains the market’s main focus, with the ongoing conflict keeping prices elevated. Brent crude is holding firm above $115 a barrel, a level we haven’t seen sustained since the shocks of 2022. We see value in buying long-dated call options to capture further upside while defining risk.
This environment feels very similar to what we saw in 2022 after the invasion of Ukraine. Back in 2025, many assumed geopolitical risk premiums would fade, but the Iran conflict has proven that supply-side shocks are the dominant factor once again. This suggests sharp, unpredictable price moves will continue to be the norm for the coming months.
Options Volatility And Trading Positioning
The natural gas situation is even more critical, especially given the damage to Qatari LNG facilities. With European TTF prices trading over $35/MMBtu, the spread to U.S. Henry Hub remains incredibly wide, reflecting the scramble for non-conflict supply. The expected relief from new U.S. export terminals is now pushed further out, tightening the market through at least 2028.
The elevated volatility in energy markets makes buying options outright very expensive. We should consider strategies that benefit from this, such as selling cash-secured puts on significant price dips, or using vertical spreads to lower the entry cost for bullish positions. Implied volatility on front-month contracts is consistently trading above 40%, presenting a clear opportunity to harvest premium.
We must also watch the demand side, as high prices are starting to impact consumption in Asia. Recent purchasing managers’ index (PMI) data from key emerging markets has shown a slight softening in manufacturing, a leading indicator for energy demand. This could create a ceiling for prices, making outright long futures positions risky without a clear stop-loss.
