WTI futures on NYMEX slipped to about $88.65 in Friday’s European session and continued to struggle to regain the $90 level. The move came as traders assessed renewed friction between the US and Iran after President Donald Trump said further attacks between the two countries would not last “too long”, while leaving open the prospect of an additional military campaign.
The latest exchange began last weekend after weeks of relative calm, triggered when US Central Command struck Iranian rocket launchers said to be preparing to send mines into the Strait of Hormuz. Deutsche Bank said the flare-up has revived concerns about regional supply risks and cast doubt on a near-term normalisation of energy flows through the strait. Commerzbank described conditions as “highly fluid” with limited evidence of durable de-escalation, while TD Securities pointed to the vulnerability of any informal arrangements and said Iran remains focused on controlling the passage as the US facilitates ship movements via the Omani route.
Outlook for WTI Amid Geopolitical Tensions
We are seeing West Texas Intermediate (WTI) struggle to break past the $90 resistance level, currently hovering near $88.65. With the US-Iran military tensions escalating near the crucial Strait of Hormuz, we advise derivative traders to prepare for heightened volatility in the coming weeks. Historically, whenever geopolitical friction threatens this vital corridor, crude prices experience sharp, unpredictable swings.
To put this risk into perspective, the Strait of Hormuz is the world’s most critical energy transit chokepoint, carrying over 20 million barrels of oil per day, which represents roughly 20% of global liquid petroleum consumption. Any prolonged disruption here could easily push WTI well past the $100 mark, meaning the current $90 ceiling is highly fragile. Because of this, we recommend buying out-of-the-money call options to capitalize on sudden upward spikes while limiting downside risk.
Options Strategies and Portfolio Hedging
Alternatively, for those expecting the $90 resistance to hold due to diplomatic efforts, we suggest deploying bull call spreads to lower the cost of entry. Implied volatility in the options market is climbing, which typically inflates option premiums and favors defined-risk strategies. We must monitor daily headlines closely, as even a minor skirmish could trigger short-covering rallies that squeeze aggressive short sellers.
For portfolio managers holding physical assets, we believe securing protective puts with a strike price around $85 is a prudent hedge against a sudden de-escalation. Historical data from similar standoffs shows that when tensions abruptly cool, oil prices can quickly drop by 5% to 10% within days. Balancing long-call exposure with selective put protection will allow us to navigate this highly fluid trading environment safely.
