WTI crude rose more than 8% on Thursday after two days of losses, trading near $103 after a low of $92.49. Prices remained sensitive to potential supply disruption in the Strait of Hormuz.
The move followed a US address indicating continued military action against Iran in the coming weeks. Earlier reports of possible negotiations had briefly eased expectations of near-term disruption.
Strait Of Hormuz Supply Risk
Iran and Oman were reported to be working on a joint plan to support safe shipping through the Strait of Hormuz after the war. The UK was also due to hold virtual talks with about 35 countries on restoring shipping.
Focus is also on an OPEC+ meeting on Sunday, where eight members were reported as likely to consider a further output increase. The option would allow producers to add supply if transit through the Strait normalises.
WTI stands for West Texas Intermediate, a US-sourced crude distributed via the Cushing hub. It is often described as light and sweet due to low gravity and sulphur content.
WTI prices are driven mainly by supply and demand, including growth, conflict, sanctions, OPEC decisions, and the US Dollar. Weekly inventory data from API and EIA can move prices; their figures are within 1% of each other 75% of the time.
Trading Implications And Catalysts
The sharp rally in WTI to over $100 a barrel is driven purely by the geopolitical risk premium tied to the Strait of Hormuz. We must recognize that this makes the market extremely volatile and sensitive to every headline. This isn’t a fundamental demand rally, so long positions are vulnerable to sudden reversals on any sign of de-escalation.
The market is right to be concerned about the Strait of Hormuz, as we know this chokepoint handles over 20 million barrels per day, roughly one-fifth of the world’s daily oil consumption. A prolonged shutdown would create a genuine supply crisis, keeping a high floor under prices for the foreseeable future. The current price reflects the market trying to calculate the odds of that worst-case scenario.
Looking back, we saw a similar pattern in early 2022 following Russia’s invasion of Ukraine, when WTI prices briefly spiked above $120 per barrel. That historical precedent suggests there is still significant upside if the military conflict in Iran escalates further. This possibility is what will keep traders hesitant to short this market aggressively.
For derivative traders, the explosion in implied volatility has made buying options extremely expensive. We should consider strategies that take advantage of this, such as selling covered calls against long physical positions or using bull call spreads to define risk and reduce the upfront cost. Simple directional bets are dangerous in this environment.
The upcoming OPEC+ meeting this Sunday is the most important near-term catalyst. Key members are sitting on millions of barrels per day in spare production capacity, a fact confirmed by EIA reports from late 2025. A clear signal that they will increase output to calm the market could easily push WTI back below $100.
Beyond the headlines, we must continue to watch the weekly EIA inventory reports. A surprise build in crude stocks would suggest that underlying demand is weakening, which would create a strong headwind against this geopolitically-fueled rally. This data will provide a crucial check on whether the high prices are beginning to destroy demand.
