Iran Strait Of Hormuz Update
Iran said “non-hostile” vessels could continue to pass through the Strait of Hormuz if they co-ordinate with its authorities. The area remained unstable, with ongoing military activity involving several regional actors. Saudi Arabia increased exports via its Red Sea port of Yanbu to reduce reliance on routes tied to the Strait of Hormuz. This move aimed to limit the impact of possible disruption in the strait. The US EIA reported a crude stock build of 6.926M barrels last week, versus expectations for 0.5M. The rise in inventories suggested weaker near-term demand and added downward pressure on prices. TD Securities reported reduced flows through the Strait of Hormuz and a decline in floating storage capacity. Market attention stayed on US–Iran contacts and weekly US inventory data.Trading Strategy Considerations
With West Texas Intermediate consolidating around the $88 mark, we are in a period of high uncertainty, making directional bets risky. The tension between potential diplomatic easing with Iran and the very real risks to supply through the Strait of Hormuz suggests the market is coiled for a significant move. This environment suggests strategies that can profit from a sharp breakout, regardless of the direction. The large and unexpected build in US crude inventories of nearly 7 million barrels is a significant bearish flag for short-term demand. This isn’t an isolated event; it follows a pattern of rising US stockpiles that we observed through the final quarter of 2025, which has kept a lid on prices. Should the proposed truce with Iran show any real progress, the risk premium currently baked into the price could vanish, potentially sending oil back toward the low $80s. However, the physical market remains structurally tight, and we must not discount the risk of a supply-driven shock. We only have to look back to the Red Sea disruptions in late 2023 to see how quickly freight rates and oil prices can spike on transit fears, even with otherwise balanced fundamentals. A single hostile incident in the Strait of Hormuz could easily overwhelm bearish inventory data and push prices toward $95 a barrel. Given these opposing forces, derivative traders should look at volatility plays. The high implied volatility, with the OVX index holding above 35 for most of this quarter, makes options expensive but reflects the genuine risk of a breakout. Buying a straddle or a strangle allows a trader to profit from a large price swing in either direction over the next few weeks, which seems more likely than a continued stalemate. For those with a directional bias but wanting to limit risk, vertical spreads are a prudent choice. A bull call spread could capture upside from a supply disruption, while a bear put spread would profit from a diplomatic breakthrough and weakening demand. These defined-risk strategies are sensible while we await a clearer catalyst, whether from the next EIA report or headlines out of Washington and Tehran. Create your live VT Markets account and start trading now.
Start trading now – Click here to create your real VT Markets account
