US President Donald Trump said Iran asked the US to lift a naval blockade of the Strait of Hormuz during talks aimed at ending a two-month conflict, Bloomberg reported on Tuesday.
In a Truth Social post on Tuesday, Trump said Iran wants the oil and gas shipping route open “as soon as possible”, while it works on its leadership situation.
Strait Of Hormuz Talks
CNN reported on Tuesday that mediators in Pakistan expect Iran to submit a revised proposal to end the war in the next few days, citing sources close to the mediation process.
At the time of writing, West Texas Intermediate (WTI) was up 2.15% on the day at $97.00.
We are seeing oil hold at $97 a barrel despite talk of de-escalation, which suggests the market remains highly skeptical of a swift resolution. This tension is keeping implied volatility elevated, with the Cboe Crude Oil Volatility Index (OVX) hovering near 55, a level indicating significant uncertainty. This environment makes selling options premium attractive, but carries substantial risk if talks collapse.
For traders who believe a diplomatic failure is more likely, holding exposure through call options remains a viable strategy. The physical market is still severely constrained by the blockade of the Strait of Hormuz, which disrupts the flow of nearly 21 million barrels per day. Any negative development from the mediation in Pakistan could easily send prices back above the $100 mark.
Options Strategies For Traders
Conversely, if we see a credible peace proposal emerge, the significant war premium currently priced into crude will evaporate quickly. This could trigger a sharp price correction down towards the low $80s, which was the prevailing range before this conflict began two months ago. Traders positioned for this outcome might consider buying put options to profit from such a decline.
This situation feels reminiscent of the volatility we experienced during the Red Sea disruptions back in 2025, where headline risk dictated price action. Given the binary nature of the outcome, using options spreads can help define risk. A bear put spread, for instance, would allow a trader to bet on a price drop while capping potential losses if the conflict unexpectedly escalates further.
