WTI fell for a second straight day, touching session lows just above $80.00, after reports pointed to a partial recovery in crude traffic through the Strait of Hormuz. The Commonwealth Bank of Australia said transit had risen to about 30%–35% of pre-war levels, easing immediate supply concerns. Even so, WTI was still on course to finish the month up more than 15%, underscoring how recent disruption continues to feed into price action.
The same note said a further rise in Hormuz flows to 50%–60% of pre-conflict volumes could restore oversupply conditions in global markets. Separately, Saudi Arabia said it had formed a 14-country coalition to protect key sea lanes from attacks by Iran or its allies, adding to downward pressure on crude. In parallel, Gulf tensions persisted after Iran attacked US bases in Kuwait, following Jordanian reports that missiles launched from Iran had been intercepted.
Market Consolidation and Short-Term Volatility
We are seeing WTI crude consolidate around the $80 mark as the market weighs a partial recovery in Strait of Hormuz shipping against ongoing Middle East violence. While the 15% gain over the last month shows strong underlying momentum, the sudden return of shipping traffic to 30%-35% of pre-conflict levels is putting immediate downward pressure on prices. Derivative traders should prepare for intense volatility in the coming weeks as these two opposing forces battle for control.
If Hormuz shipments climb to 50% or 60% of their historical levels of roughly 20 million barrels per day, the global market could quickly shift back into an oversupply. To hedge against this sudden downside risk, we recommend using bear put spreads to capture potential drops back toward the $75 level without risking too much capital. This strategy protects against a sudden flood of oil if the Saudi-led 14-country coalition successfully secures the shipping lanes.
Volatility Strategies and Trade Recommendations
On the flip side, we must not ignore the threat of further escalations, especially with recent missile interceptions and attacks on military bases keeping geopolitical risk premiums incredibly high. Historical data shows that sudden supply disruptions in the Gulf can spike WTI implied volatility by over 40% in a matter of days, making long options expensive to buy outright. Therefore, we suggest selling out-of-the-money puts to collect high premiums while using the proceeds to fund upside call options.
With physical oil markets remaining structurally tight as experts point out, any price dips toward $78 are likely to find strong buying support. We advise traders to focus on short-term weekly options rather than long-term positions to avoid getting caught on the wrong side of sudden political announcements. By focusing on defined-risk spreads, we can navigate this highly unpredictable environment while keeping our capital safe.
