WTI traded near $74.50 on Wednesday, up more than 3.5%, extending a rebound from the $68.00 low set in early July as hostilities around the Strait of Hormuz intensified. Iran hit three tankers between Monday and Tuesday, while the US revoked the sanctions waiver underpinning legal Iranian oil exports and, via CENTCOM, struck more than 80 targets including air defences, coastal radar and anti-ship missile batteries, alongside over 60 Revolutionary Guard small boats. Transactions under the old licence must wind down by July 17, as a British Navy-linked maritime agency raised the strait\u2019s threat level to severe. Reports also cited explosions and power cuts near Chabahar and Konarak, while Iranian-linked outlets said the Bushehr nuclear plant was undamaged.<\/p>\n\n
Price action remained capped: March\u2019s strait closure drove WTI above $113.00, but this rally stalled below $76.00, under the 200-day EMA just shy of $77.50 and well below the 50-day EMA above $81.00. OPEC+ recently raised August output targets by 188,000 barrels per day, while gold fell almost 1% and equities were steady, mirroring a contained-energy-shock view. The calendar includes China\u2019s CPI at 01:30 GMT (1.1% YoY, -0.2% m\/m) and PPI seen at 4.1% versus 3.9%, plus US jobless claims at 12:30 GMT (218K) and FOMC minutes at 18:00 GMT showing an almost even split between hikes and holds; June US CPI is due July 14. Support sits at $72.00, then $68.00 and the yearly low near $62.00.<\/p>\n\n
Given the renewed conflict in the Strait of Hormuz, we see the recent bounce in crude oil from $68 as more than a temporary reaction. The rapid failure of the Versailles agreement suggests a pattern of recurring escalation, which means the “war premium” is now a structural part of the price. We should treat this not as a one-off event, but as the new trading environment for the foreseeable future.<\/p>\n\n
For the coming weeks, we believe that buying call options on WTI futures is the most direct way to gain exposure with defined risk. Implied volatility in crude options has already jumped from around 25% to nearly 40% in just a few days, and we expect it to climb higher. We are specifically looking at August and September contracts with strike prices around the $78 to $80 levels to capture a potential move towards technical resistance.<\/p>\n\n
This bullish view is supported by a physically tightening market, not just fear. The latest Energy Information Administration (EIA) report showed a surprise crude inventory draw of 3.8 million barrels, signaling that underlying demand is robust. With the US revocation of Iranian sanctions waivers becoming effective on July 17, we are facing a real supply reduction just as shipping insurance rates are repriced higher.<\/p>\n\n
However, we must temper our enthusiasm with the weak global demand picture. Today\u2019s Chinese CPI data came in softer than expected at 0.9% year-over-year, confirming that the world’s largest importer is still struggling with consumer spending. Similarly, the hawkish tone from the Federal Reserve minutes creates a headwind, as higher interest rates could slow the economy and strengthen the dollar, making oil more expensive.<\/p>\n\n
Therefore, a simple long futures position carries too much risk of a sudden reversal on a peace headline or poor economic data. We prefer using derivative structures like bull call spreads, such as buying the August $77 call and selling the $82 call. This strategy profits from a measured rally, which aligns with the market’s current view of a contained conflict rather than a full-scale closure of the strait like the one that sent prices to $113 in March.<\/p>\n\n
Historically, periods of tension in the Strait of Hormuz, like the incidents in mid-2019, have led to sustained periods of elevated volatility rather than a straight-line price rally. Our plan is to hold these bullish positions as long as WTI remains above the $72 breakout level. A daily close below this support would indicate the geopolitical premium is fading and would be our signal to exit these trades.<\/p>\n\n\n\n