WTI fell on Thursday after three days of gains, trading near $101.45 and down 3.70% on the day. It stayed above $100.
Tensions around the Strait of Hormuz continued to raise supply concerns. The Associated Press reported that US President Donald Trump is exploring ways to end the shutdown of the route.
Pressure On Iran Strategy
The reported plan does not include lifting the US naval blockade on Iranian ports. It focuses on working with allies to increase pressure on Iran.
The Strait of Hormuz is a key route for Middle Eastern crude exports. Disruption to shipping there can tighten global supply and affect prices.
Danske Bank reported that tensions linked to the Iran conflict have supported energy prices. It said markets remain sceptical about a quick return to normal maritime traffic.
WTI is West Texas Intermediate, one of three major crude benchmarks alongside Brent and Dubai. It is a US-sourced “light” and “sweet” crude that is traded via the Cushing hub.
Key Drivers And Market Signals
WTI prices are driven by supply and demand, global growth, political instability, wars, sanctions, OPEC decisions, and the US Dollar. Weekly API and EIA inventory reports can move prices; their results are within 1% of each other 75% of the time, and OPEC has 12 members that set output quotas twice a year.
We remember the market tension in 2025 when WTI crude pushed above $100 per barrel amid the near-shutdown of the Strait of Hormuz. With prices today hovering near $82, the market seems to be discounting the potential for another supply shock. This complacency presents an opportunity, as the core issues from that period have not been resolved.
The fundamental picture is already tightening even without a major geopolitical event. Just this week, the Energy Information Administration (EIA) reported a surprise crude inventory draw of 6.4 million barrels, far exceeding expectations and signaling strong underlying demand. This drain on supply comes just as we head into the peak demand of the summer driving season.
Recent naval activity in the Gulf, including aggressive maneuvers by patrol boats near commercial tankers, is uncomfortably similar to the events that preceded the 2025 price spike. The market, however, has not yet factored in a significant risk premium for a potential disruption. This creates a disconnect between the calm market sentiment and the growing on-the-ground reality.
Considering this backdrop, buying out-of-the-money WTI call options for the next few weeks is a sensible approach. This strategy provides exposure to a potential sharp rally if Hormuz tensions escalate further. With broad market volatility relatively low, as the VIX index sits below 16, the cost of securing this upside protection is still quite reasonable.
We only have to look at historical precedents, such as the drone attacks in 2019 that caused oil to spike nearly 15% in one session, to understand how quickly the situation can change. A similar incident today would likely see crude prices rapidly test the $95 level we saw during the crisis last year. The current setup offers a limited-risk way to position for a high-impact event.
