Brent crude prices firmed after US strikes on Iranian military assets near export facilities on Kharg Island, alongside renewed attacks on regional oil assets. The situation increased concern about shipping routes through the Strait of Hormuz and the Red Sea. Kharg Island is the Persian Gulf port where up to 90% of Iranian oil exports are typically loaded onto tankers. Further action involving foreign troops on the ground was discussed as a possible escalation, and Iranian officials said they would respond to attacks on their oil infrastructure.

Risks To Shipping And Supply

Possible disruption in the Red Sea could limit the use of Saudi Arabia’s East–West pipeline, which can redirect 5–7mn bbl/day. That diversion capacity is set against a potential 18–20mn bbl/day supply interruption linked to the Strait of Hormuz. The strikes also raised questions about flows linked to China, with Kharg Island described as the origin point for a large share of China’s oil imports. The report also noted the US is a mostly self-sufficient net energy exporter and is positioned near key maritime chokepoints for Chinese energy imports. The article stated the effects could spread beyond energy into petrochemicals, agriculture, and pharmaceuticals. It also said the piece was produced with an AI tool and reviewed by an editor. Given the US strikes on Iranian military assets near Kharg Island late last year, a significant risk premium is now embedded in oil prices. We have seen Brent crude futures consolidate above $105 per barrel, a sharp increase from the sub-$80 levels seen before the initial attacks in 2025. This elevated price floor reflects the market’s ongoing assessment of a major supply shock.

Trading And Hedging Implications

The current environment is defined by extreme volatility, with the Cboe Crude Oil Volatility Index (OVX) spiking to levels reminiscent of early 2022. Traders should therefore focus on options strategies that benefit from sharp price movements. Buying long-dated call options or vertical call spreads offers a way to capture upside from any further escalation while defining downside risk. The primary concern remains the potential closure of the Strait of Hormuz, a chokepoint for nearly 20% of global oil supply. We know from historical data, such as the 1980s Tanker War, that even minor disruptions in the strait can cause disproportionate price spikes. The inability of the Saudi East-West pipeline to fully compensate for a closure means any direct conflict there would be catastrophic for supply. We are also watching China’s reaction, as the Kharg Island strikes directly threaten a major source of their energy imports. Shipping insurance rates for tankers heading to Asia from the Persian Gulf have reportedly tripled in the past month. This pressure is forcing Chinese buyers to seek more expensive barrels from the Atlantic basin, tightening the entire global market. Opportunities exist in spread trading as well, particularly the Brent-WTI spread, which has widened significantly due to Brent’s direct exposure to Middle East maritime risk. We expect this premium to persist as long as tensions remain high. Traders should also monitor crack spreads, as a sustained crude rally will squeeze margins for refined products like gasoline and diesel, creating separate trading opportunities. Create your live VT Markets account and start trading now.

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