Strait Of Hormuz Developments
Iran told the UN Security Council and the International Maritime Organization that “non-hostile vessels” may pass through the Strait of Hormuz if they coordinate with Iranian authorities, Reuters reported. Military action continued between the US, Israel, and Iran, with reports that Washington is preparing to send more troops to the region. To reduce the risk of disruption through Hormuz, Saudi Arabia raised exports from its Red Sea Yanbu port to nearly 4 million barrels per day, above pre-conflict levels. The API said US weekly crude stocks rose by 2.3 million barrels in the week ended 20 March, versus expectations for a 1.3 million-barrel fall. The market is presenting conflicting signals, with the WTI price near $88 balancing geopolitical risk against a surprise inventory build. This suggests that implied volatility in crude options is likely to remain elevated in the coming weeks. We believe strategies that profit from price swings, rather than a specific direction, should be considered. The CBOE Crude Oil Volatility Index (OVX) recently climbed to 45.2, a level reflecting significant market uncertainty about the near-term future of oil prices. The unexpected 2.3 million barrel stock build reported by the API, if confirmed by the EIA later this week, would add to a month-long trend where U.S. commercial inventories have swelled by over 12 million barrels, pressuring prices downward.Positioning For Volatility
We see a clear divergence between ceasefire hopes and the reality of ongoing military deployments. We saw a similar dynamic back in the fourth quarter of 2025, where an initial price spike from regional fears was quickly erased once it became clear that key shipping lanes would remain open. A long straddle, which profits from a significant move in either direction, could be a prudent way to position for a binary outcome like a sudden peace deal or a sharp escalation. Saudi Arabia’s move to boost Red Sea exports to nearly 4 million bpd provides a significant buffer against potential disruptions in the Strait of Hormuz. This action, combined with OPEC+ holding firm on its production cuts of 2.2 million bpd, creates a complex supply picture. This makes options spreads, which can limit risk while targeting a specific price range, an attractive alternative to outright long or short positions. Create your live VT Markets account and start trading now.
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