Oil markets remain exposed to the Iran and Middle East conflict, with the Strait of Hormuz still constrained. Tankers have begun testing alternative southern routes close to Oman rather than the northern side near Iran.
Reports indicate more tankers have passed through in recent days, but overall volumes remain well below pre-conflict levels. Movement has been mainly from West to East, meaning ships are largely exiting the Strait rather than travelling both ways.
Supply Impact From Iraq Flows
Iran has stated that Iraq is now allowed to ship oil out through the Strait of Hormuz. If applied in full, this could add about 3mb/day of supply to the market.
However, immediate effects may be limited by insurance conditions, tanker availability, and shipping timelines. There is also uncertainty about how Iran defines “Iraq oil”.
The ongoing tensions in the Middle East continue to add a significant risk premium to oil prices, which we see reflected in Brent crude holding firm around $98 a barrel. This geopolitical uncertainty makes us cautious on the outlook for risk assets and the currencies of oil-importing Asian nations. The elevated CBOE Volatility Index, which has been hovering above 20 for weeks, shows that the market shares this caution.
Given this backdrop of high volatility and uncertain supply, we believe traders should consider strategies that benefit from a rise in oil prices but have a built-in cap. Bull call spreads on crude oil futures, for instance, offer a way to profit from a moderate price increase while limiting the upfront cost of buying options. This approach reflects the potential for positive supply news which could prevent prices from spiraling out of control.
How Traders Can Position
We are watching reports of tankers testing an alternative southern route through the Strait of Hormuz, near Oman. While recent maritime analytics show tanker traffic in March 2026 was still down roughly 55% from pre-conflict levels in 2025, any sustained increase in passage could ease supply fears. This potential for increased flow, even if small, supports the view that upside price moves may be limited.
Furthermore, Iran’s recent announcement that it will allow Iraqi oil to ship through the Strait introduces a major wild card. If this were to bring up to 3 million barrels per day back to the market, it would substantially weigh on prices, but the timing and actual volume remain highly uncertain. This uncertainty makes outright bearish bets risky, but it justifies capping the potential upside in any bullish oil trade.
This situation reminds us of the energy price surge in late 2025, which saw significant weakening in currencies like the Japanese Yen and Korean Won. Traders might therefore look at currency options to hedge against or speculate on further weakness in these currencies if oil prices remain high. For example, buying USD/JPY call options could be a prudent way to position for a stronger dollar against the yen.
