International Support Unclear
He also said countries should be helping the US. He added that he is not sure other countries want him to say whether they are helping. With the US taking a hard line on Iran’s activities in the Strait of Hormuz, we should anticipate heightened volatility in energy markets. These comments follow last month’s incident where a tanker was briefly detained, which sent May delivery Brent crude futures above $98 a barrel for the first time in over a year. As of this week, maritime insurance premiums for vessels passing through the strait have already risen by 15%, reflecting the growing tension. The stated belief that Iran has “very few shots left” creates an environment ripe for options trading. We should consider buying volatility, as implied volatility on crude options is already climbing, with the OVX now trending towards 45. This is a level we haven’t seen since the supply chain disruptions back in late 2025, suggesting the market is pricing in a significant event. We can look back to the market’s reaction following the attacks on Saudi oil facilities in 2019 for a historical parallel. Brent prices surged almost 20% in a single session, showing how quickly geopolitical events in this region can be priced in. A similar, sharp spike is a distinct possibility if any direct confrontation occurs, even if it proves to be short-lived.Positioning For Volatility
The commentary on international support being on the way, but unconfirmed, presents a binary risk. If a strong coalition is formally announced, it could calm markets and push oil prices down as the risk of a unilateral conflict fades. However, if no allies are named in the coming weeks, the market will likely view this as bluster, adding to the risk premium. Given this uncertainty, we should consider strategies that profit from a large move in either direction, such as a long straddle on major oil ETFs. This approach allows us to capitalize on the rising volatility without betting on a specific outcome of either escalation or a sudden diplomatic resolution. The current market setup indicates that a period of range-bound trading is the least likely outcome. Create your live VT Markets account and start trading now.
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