WTI, the US crude oil benchmark, traded near $65.70 in early European hours on Monday, moving below $66.00. The price fell as US-Iran talks are set to resume later this week, and markets await the American Petroleum Institute (API) report due on Tuesday.
The next round of negotiations is due in Geneva on Thursday. Iran’s Foreign Minister Abbas Araghchi said on Sunday there is a good chance to have a diplomatic solution and that a solution is within our reach
Geopolitical Risk And Supply Disruption
There were also references to possible tensions between the two countries and the risk of supply disruption. US President Donald Trump said last week that bad things would happen to Iran if there was no deal on Iran’s development of nuclear weapons.
Tariff measures were linked to concerns about weaker oil demand. The US Supreme Court ruled Trump’s sweeping tariffs illegal, and Trump then imposed a new 15% tariff on Saturday, saying on Truth Social it would be effective immediately and that more tariffs would follow.
Looking at the current market on February 23, 2026, we see a familiar pattern for West Texas Intermediate, which is now trading around $78 a barrel. The dynamic we saw back in 2025, with geopolitical supply fears clashing with economic demand worries, is playing out again today. This creates significant volatility, which presents clear opportunities for derivatives.
On the supply side, we are watching renewed tensions in the Strait of Hormuz, especially following the drone incident last month. With nearly a fifth of the world’s global oil supply passing through that chokepoint, any disruption could cause prices to spike sharply. This risk makes call options attractive as a hedge against, or a bet on, a sudden escalation.
Demand Headwinds And Volatility Strategy
However, a strong headwind is coming from fears of slowing global demand. The latest data showed Eurozone GDP growth for Q4 2025 was a meager 0.1%, and the US Federal Reserve’s preferred inflation gauge for January 2026 came in slightly higher than expected at 2.8%, suggesting interest rates may stay restrictive for longer. This potential for weakened consumption puts a ceiling on prices and supports positions like buying put options.
Given these opposing forces, implied volatility has been climbing, making strategies that profit from large price swings, such as long straddles, a logical consideration. We anticipate that prices could break significantly in either direction in the coming weeks. The weekly API and EIA inventory reports will remain crucial short-term catalysts, likely triggering sharp, tradable movements.
