Iran sent the US a proposal aimed at reopening the Strait of Hormuz and ending the war, according to Bloomberg citing an Axios report on Monday. The report cited a US official and two sources familiar with the matter.
The proposal included extending a ceasefire to allow work towards a permanent end to the fighting. It also set out that nuclear negotiations would be delayed.
Ceasefire And Nuclear Talks Linkage
Under the plan, nuclear talks would only begin after a US blockade of the Strait of Hormuz was lifted. Axios said Pakistani mediators delivered the proposal to the White House.
The report said it is unclear whether the US will consider the proposal. Market reaction showed WTI up 0.33% at $93.70 at the time of writing.
We remember the proposal last year to end the fighting and reopen the Strait of Hormuz after the US blockade sent prices climbing. That memory of WTI crude hitting $93.70 serves as a critical reference point for the market’s sensitivity to regional tensions. The core issues from 2025 were only postponed, not solved, leaving the market vulnerable.
The strategic importance of this waterway cannot be overstated, as we see about 21 million barrels of oil pass through it daily, representing roughly 21% of global consumption. With WTI currently trading around $84 per barrel as of late April 2026, any renewed hint of disruption could easily trigger a rapid 10-15% price spike. This underlying risk creates a significant upside bias in the market.
Options Market Signals And Positioning
Given this context, implied volatility in the crude oil options market is elevated compared to periods of calm. We saw the oil volatility index (OVX) surge during the 2025 blockade, and while it has since subsided, it remains well above its historical lows. This sustained premium indicates that the market is still pricing in the potential for a sudden supply shock.
Traders should consider buying long-dated call options to hedge against or speculate on a future flare-up. Strikes at $95 or $100, which seemed distant just months ago, are now a realistic possibility if diplomatic channels falter again. These positions offer a defined-risk way to capture the explosive upside potential from a repeat of last year’s events.
This tension is visible in the market’s structure, with a noticeable upside skew in options pricing. Out-of-the-money calls are trading at a significant premium to equivalent out-of-the-money puts, a clear signal that traders are more concerned about a price surge than a collapse. This skew itself presents trading opportunities for those structuring spreads.
For those with a higher risk tolerance who believe the situation will remain stable, selling cash-secured puts or credit spreads at lower strikes can be attractive. This strategy allows us to collect the rich volatility premium while betting that a worst-case scenario will be avoided. However, the risk of a sudden geopolitical shift makes this a far more dangerous position.
Recent data from the Energy Information Administration (EIA) shows that global commercial crude inventories are sitting just below their five-year average. This relative tightness in supply means the market has less of a buffer to absorb any disruption from the Strait of Hormuz. A shutdown, even for a few days, would have a much more immediate and severe impact on prices than it would have in a well-supplied environment.
