Strait Of Hormuz Tensions
US President Donald Trump asked allied countries to help protect the Strait of Hormuz. Reports point to a White House announcement in the coming days. US Energy Secretary Chris Wright said he expects the war to end within “the next few weeks”, according to the Guardian. He said oil supplies could rebound and energy costs could fall after that. WTI traded at $98.89 on the 4-hour chart, above the 20-, 100- and 200-period SMAs. The 20-period SMA was near $91.55, the 100-period near $77.45, and the 200-period around $70.54. The Momentum indicator was above its midline, while the RSI was 62. Support levels were cited at $91.55, $77.45, and $70.54, with resistance near $100 and a possible move towards $120 if prices break higher.Market Outlook And Trading Strategy
We should recall that around this time last year, in early 2025, the escalation of the Iran conflict sent WTI crude prices soaring toward $99 a barrel. The attack on Kharg Island created significant fear about supply disruptions through the Strait of Hormuz. This initial shock set the stage for a prolonged period of market tension. The US Energy Secretary’s prediction at the time for a conflict lasting only a “few weeks” proved to be overly optimistic, as the situation has since become a protracted naval standoff. Instead of supplies rebounding, OPEC+ responded to the instability by announcing a further production cut of 1.5 million barrels per day in late 2025 to support prices. This has kept global inventories tighter than forecasted, with current EIA data showing US crude stockpiles 12% below the five-year average. Today, WTI is trading at a much higher level, hovering around $115 per barrel, validating the view that disruptions would worsen. The ongoing conflict has reduced tanker traffic through the Strait of Hormuz by an estimated 20%, according to recent maritime tracking data. This has cemented a significant risk premium into the current price of oil. Given this sustained volatility, traders should consider strategies that profit from large price swings, not just direction. Buying long-dated straddles on WTI options would allow us to capitalize on sharp moves, whether they are caused by a sudden military escalation or an unexpected peace agreement. The CBOE Crude Oil Volatility Index (OVX) is currently elevated at 52, suggesting the market expects these significant price swings to continue. We should also focus on the widening spread between Brent and WTI crude. The direct threat to Middle Eastern supply has pushed Brent crude to a $14 premium over WTI, up from an average of $4 last year. Derivative traders can take positions that profit from this spread widening further if the conflict intensifies in the Persian Gulf. For those holding long positions, hedging against a sudden price drop is critical. A sudden ceasefire agreement remains a low-probability but high-impact risk that could send prices tumbling back below $90. Purchasing put options with strike prices around the $100 level offers a sensible insurance policy against such a sharp reversal. Create your live VT Markets account and start trading now.
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