West Texas Intermediate (WTI) traded near $103.80 a barrel in early European hours on Friday. It has risen by over 10% as supply fears grew after new threats towards Iran from US President Donald Trump.
Trump said military action against Iran could intensify over the next two to three weeks. He gave no details on any plan to reopen the Strait of Hormuz.
Iran Oman Hormuz Draft Protocol
Iran’s Foreign Minister Abbas Araghchi said recent US strikes hit civilian infrastructure and would not change Tehran’s position. Reports also said Iran and Oman are preparing a protocol for transit through Hormuz.
In an interview with Sputnik, Iranian Deputy Foreign Minister Kazem Gharibabadi said Iran is finalising the draft. He said talks with Oman will begin soon to set up a joint framework.
The UK is holding virtual talks with around 40 countries on ways to reopen Hormuz. The US is not taking part after Trump said reopening the route is not America’s responsibility, and told European nations to “go get your own oil.”
Looking back at the events of 2025, the surge in WTI to nearly $104 a barrel was a clear signal of heightened geopolitical risk. Traders should have immediately focused on instruments sensitive to price volatility, as the uncertainty around the Strait of Hormuz was the primary market driver. The lack of clarity from the US meant that sharp price swings were more likely than a steady trend.
Options And Volatility Trading Responses
We saw traders respond by increasing their exposure to long-dated call options, specifically targeting strikes around $110 and $120. This was a direct bet on a supply shock worsening over the following weeks. Data from that period showed the CBOE Crude Oil Volatility Index (OVX) jumped from the mid-30s to over 50, confirming that the market was pricing in extreme price movements.
Given the binary nature of the risk—either a resolution or a major conflict—selling puts or creating bull put spreads would have been a prudent way to collect premium. This strategy capitalized on the high implied volatility and the belief that a complete supply catastrophe was unlikely. We remember that even without a full closure of the strait, weekly EIA reports from 2025 showed a dip in global inventories as shippers rerouted tankers, which supported prices above $95.
The futures curve also offered opportunities, as it shifted into a steeper backwardation. Traders should have considered calendar spreads, selling the front-month contract and buying a deferred one to profit as the immediate supply fears eventually eased. This was a less directional way to trade the theme, profiting from the structure of the market rather than the outright price level.
