Oil prices rose by more than 5% on Thursday after two days of falls, following US President Donald Trump’s threat to escalate the war with Iran. Brent traded above $107/bbl and WTI was near $106/bbl on Thursday morning after his address.
Even if shipping through the Strait of Hormuz restarts, market conditions are expected to recover slowly. Production restarts, logistics and inventory rebuilding are expected to take time.
Oil Market Reaction And Supply Constraints
US stock data were mixed across the complex. Gasoline stocks fell by 0.6m barrels and distillate stocks fell by 2.1m barrels, alongside weak refinery runs and rising implied demand.
The report was produced using an AI tool and checked by an editor. It was published by the FXStreet Insights Team, which selects market observations from external experts and internal and external analysts.
We recall how prices surged last year when tensions with Iran escalated under the Trump administration, pushing Brent crude above $107 per barrel. That situation demonstrated just how quickly geopolitical shocks can add a significant premium to the market. This memory should guide our actions, as the slow return to normal operations back then highlights the sticky nature of supply disruptions.
Today, the market appears more stable, with Brent trading this week in a narrower range around $92 per barrel. OPEC+ continues to manage supply, but we see US shale output growth slowing, with production currently plateauing around 13.8 million barrels per day. This balance could easily be upset, as it was in 2025 when product inventories for gasoline and distillates drew down sharply.
Positioning For Renewed Volatility
Underlying tensions in the Middle East have not disappeared, and we feel the market is underpricing the risk of a new flare-up. Recent data from the EIA shows global oil inventories have declined for three consecutive months, leaving the market with a smaller buffer against shocks. A repeat of last year’s uncertainty could have a similar, if not greater, impact on prices.
Implied volatility has been falling, with the CBOE Crude Oil Volatility Index (OVX) recently trading near a low of 28. This indicates that options contracts are relatively inexpensive at the moment. We see this as a clear window of opportunity.
Therefore, building exposure to a potential price spike through derivatives is the prudent move over the coming weeks. Buying out-of-the-money call options or establishing bull call spreads for the summer months provides a low-cost method to profit from sudden upward moves. This allows traders to position for a repeat of last year’s volatility while strictly defining their maximum risk.
