China’s Foreign Ministry said Beijing wants the Strait of Hormuz to reopen as early as possible. It also called for a comprehensive and lasting ceasefire to be reached as soon as possible.
The ministry said an earlier solution would benefit the United States, Iran, and countries in the region. After the comments, WTI oil showed no major price move and was 0.3% higher at about $98.10.
WTI (West Texas Intermediate) is a type of crude oil traded internationally, alongside Brent and Dubai. It is known as “light” and “sweet” due to relatively low gravity and sulphur content, is sourced in the United States, and is distributed via the Cushing hub.
WTI prices are mainly driven by supply and demand, including changes in global growth. Political instability, wars, sanctions, OPEC decisions, and the US dollar also influence pricing because oil is traded in US dollars.
Weekly inventory reports from the API and EIA can move prices by indicating shifts in supply and demand. Their results are similar within 1% of each other 75% of the time, with the EIA generally treated as more reliable.
OPEC has 12 member countries and sets production quotas at twice-yearly meetings. OPEC+ adds 10 non-OPEC members, including Russia.
Given the tensions surrounding the Strait of Hormuz, we see the market’s minimal reaction as a point of concern and opportunity. The WTI price holding near $98.10 suggests traders are either not taking the threat of a prolonged closure seriously or are waiting for more definitive news. This complacency could create a chance for a sharp move later.
We must consider the tight underlying supply situation, which supports higher prices regardless of the strait’s status. The latest Energy Information Administration (EIA) report for the week ending May 8, 2026, showed a larger-than-expected crude inventory draw of 4.2 million barrels, signaling robust demand. This fundamental tightness means any real supply disruption would have an amplified effect on prices.
Looking back at 2025, we saw a year where OPEC+ successfully managed production to keep prices largely range-bound between $85 and $95. Now in mid-2026, with prices already pushing the upper end of that old range, the market is more fragile. All eyes will be on the upcoming OPEC+ meeting in the first week of June to see how they respond to both the geopolitical risk and strong demand signals.
The current situation suggests that implied volatility in crude oil options may be undervalued. This presents an opportunity to purchase options contracts, as a sudden escalation or a swift resolution would cause a significant price swing, making strategies like long straddles potentially profitable. We believe the market is underpricing the binary risk of the strait’s status in the coming weeks.
For those with a directional bias, call spreads could be an effective way to position for a continued rise in oil prices while defining risk. For example, buying a July 2026 $100 call while selling a July $105 call would offer a low-cost way to profit if the situation worsens and WTI moves toward $105. Conversely, put spreads could be used if a quick diplomatic solution seems likely.
In the immediate future, we will be closely monitoring the weekly API and EIA inventory reports for further signs of demand strength. More importantly, we should watch satellite tanker tracking data in the Persian Gulf. Any significant deviation from normal shipping traffic through the Strait of Hormuz will be the most direct indicator of a true supply disruption.
