WTI rose for a third day, trading near $96.90 per barrel during Asian hours on Wednesday. Prices increased as supply worries grew after US–Iran talks stalled and the Strait of Hormuz stayed effectively closed.
US President Donald Trump said Iran had asked the US to lift its naval blockade of the Strait while negotiations continue. The closure has stopped about 20% of global oil shipments.
Supply Risks Intensify
The US added further pressure on Iran, including possible sanctions on Chinese refiners linked to Tehran. It also considered measures against countries paying transit fees to pass through Hormuz.
The UAE is due to leave OPEC on 1 May, Reuters reported on Tuesday. The report linked the move to the Iran conflict and growing divisions among Gulf states.
US Treasury Secretary Scott Bessent said storage at Kharg Island was close to full, costing Iran about $170mn per day in lost revenue. He said the Treasury had sanctioned much of Iran’s shadow tanker fleet and warned that buyers of Iranian oil could be shut out of the US banking system.
With West Texas Intermediate crude pushing towards $97, we see the immediate path for oil prices as sharply upward. The effective closure of the Strait of Hormuz has taken roughly 21 million barrels per day, or 20% of global supply, off the market for the time being. This major disruption means traders should anticipate continued price gains and position accordingly.
Volatility And Positioning
The immense uncertainty surrounding the US-Iran conflict and the UAE’s upcoming OPEC exit points to extreme market volatility. We expect the CBOE Crude Oil Volatility Index (OVX) to trade at multi-year highs, similar to the spikes seen during the 2022 supply shock. Buying call options on WTI and Brent futures for June and July 2026 expiration is a primary strategy to capture this expected upward momentum.
Historically, geopolitical supply shocks cause rapid price escalations, as we witnessed back in 2022 when Brent crude jumped from $90 to over $120 in less than a month. The current Hormuz situation is a more direct and significant disruption to physical supply. Therefore, it is not unreasonable to see prices test the $120 level again before the end of the second quarter.
We also anticipate a significant widening of the price spread between Brent and WTI crude. The supply crisis is centered on Middle Eastern oil, which is benchmarked to Brent, making it more sensitive to the immediate shortages. The UAE’s official departure from OPEC on May 1st is a key date to watch, as it will likely inject further instability and bullish sentiment into the market.
Unlike in past crises, government intervention options appear limited, strengthening the case for higher prices. The US Strategic Petroleum Reserve currently holds around 365 million barrels, near a 40-year low, leaving little capacity to soften the blow of a prolonged outage. This limited buffer, combined with sanctions constricting Iran’s shadow fleet, suggests the supply squeeze will not be resolved quickly.
