Deutsche Bank analysts report that Brent oil prices have steadied after recent moves linked to conflict risk. Brent crude fell 2.84% to $100.21 a barrel, while the 6-month future dropped 2.64% to $83.40 a barrel. Prices had spiked as concerns grew about disruption to flows through the Strait of Hormuz. Renewed expectations of resumed shipping through the strait helped reduce these concerns.

Market Mood Turns Cautious

Comments from the International Energy Agency added to the calmer tone. Its Executive Director said more stockpiles could be released if needed. UAE’s Fujairah oil export terminal was hit by an Iranian strike on Monday, then partially resumed operations later the same day. Market attention also turned to the chance that some countries’ vessels could pass through the strait. A few tankers exited the Gulf over the weekend, but this was far below normal traffic. Typical volumes are around 50 tankers a day. The article notes it was produced with an AI tool and reviewed by an editor.

Strategy Implications For Brent

The recent stabilization in Brent crude near $100 a barrel is a key signal for us after the flare-up. While this is a relief, the significant gap between the current price and the six-month future at $83.40 shows the market is still pricing in a high short-term risk premium. This structure, known as backwardation, presents clear opportunities for calendar spread trades, betting this gap will narrow as tensions ease further. We are seeing implied volatility cool off, with the oil volatility index (OVX) falling from its crisis highs above 60 to the mid-40s as of this week. This suggests the market is less fearful of an immediate escalation, creating an environment to potentially sell near-term premium through options. However, this level is still nearly double the historical average, indicating the risk of another sharp move remains very real. This situation is reminiscent of the initial Hormuz conflict we experienced in late 2025, where prices spiked before entering a prolonged period of high volatility. That pattern suggests that while the immediate crisis may seem to be over, the underlying tension will keep options premiums elevated. We should therefore be wary of being caught short on volatility, as another headline could easily trigger a sharp reversal. The latest global manufacturing PMI figures for February 2026, which showed a slight contraction at 49.8, point to a softening demand picture for oil. This underlying economic weakness, combined with the IEA’s modest demand growth forecast, is likely what’s keeping longer-dated futures contracts suppressed. For us, this means any purely supply-driven rally could be short-lived if it is not supported by fundamental demand. Given these conflicting signals, we believe that using defined-risk option structures is the most prudent approach for the coming weeks. Buying put spreads could offer cheap protection against a price drop driven by weak economic data or a faster-than-expected resolution. Meanwhile, call spreads allow for participation in another potential spike without exposing us to excessive capital risk. Create your live VT Markets account and start trading now.

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