President Trump is considering economic sanctions on Russia if there is no cease-fire. This comes after a period of relative quiet on the issue since his meeting with Putin in Alaska.
Trump previously used India as an example by increasing tariffs to 50% for purchasing oil from Russia. This measure served as a warning to countries about the consequences of buying Russian oil.
Potential Economic Impact
He appears to be renewing these threats following a recent pause. His approach involves making it difficult for countries that engage in oil trade with Russia, aiming to reduce Russia’s oil revenue, which is funding the conflict.
The renewed threat of sanctions introduces significant uncertainty into the energy markets, which we are seeing priced in almost immediately. Implied volatility on crude options is climbing, with the Cboe Crude Oil Volatility Index (OVX) showing a jump of over 12% in the last 48 hours. This suggests traders are bracing for sharp price swings in the weeks ahead, moving away from the relative calm of early August 2025.
We should anticipate upward pressure on oil prices, as any sanctions would target Russia’s ability to export its crude. Russia currently supplies over 9 million barrels per day to the global market, and even a partial disruption would tighten supply considerably, according to the latest EIA reports. This makes positioning for higher prices through derivatives a primary strategy.
Strategies for Traders
Looking back, we all remember the price shock in 2022 when sanctions first hit Russian energy, sending WTI crude well over $120 a barrel. While the market has since adapted, that precedent is now a major factor preventing traders from shorting oil. That historical spike is why we are seeing WTI futures for October delivery already testing the $90 resistance level.
Given the rise in volatility, simply buying call options is becoming expensive. We believe a better approach is using bull call spreads on Brent or WTI, which allows us to bet on rising prices while defining our risk and lowering the entry cost. Traders are already piling into the October and November contracts, focusing on strike prices between $95 and $105.
However, we must also consider the possibility that this is just diplomatic maneuvering, as seen after the Alaska meeting. A sudden breakthrough or a sign that this is merely a bluff would cause a sharp sell-off in crude prices. Therefore, holding some cheap, out-of-the-money put options could serve as a valuable hedge against a sudden reversal.
