Rabobank reported rising geopolitical risk linked to possible US–Iran hostilities, with media references to a high probability of war. It said markets are focusing on the chance of Iranian retaliation across the region.
The note pointed to recent US logistics movements and an Axios headline that brought the issue back into focus for oil markets. It said the risk balance tilted towards a US strike after market close on Friday.
Regional Retaliation Scenarios
It said the scale of equipment moved to the Middle East suggested any action could last weeks rather than ending before markets reopen on Monday. It added that retaliatory scenarios discussed include actions across the region, via terror cells in the West, including in Europe, and possible moves in the Strait of Hormuz.
The report said such developments could move both markets and geopolitics. It added that oil and LNG prices would likely spike and called for a US plan to mitigate energy market disruption.
We are seeing a significant build-up of war risk premium in energy markets, suggesting traders should prepare for sudden price shocks. The likelihood of a US-Iran conflict is now viewed as very high, which could send Brent crude, currently trading around $96 a barrel, soaring in the coming weeks. This isn’t distant speculation; the logistics on the ground suggest an event could happen with little warning.
The focus is squarely on the Strait of Hormuz, a critical chokepoint for global energy. Over 20% of the world’s daily oil supply passes through this narrow waterway, a figure that has remained consistent for years. Any military action here would immediately threaten this flow, creating a supply shock not seen in decades.
Derivatives Market Volatility
For derivative traders, this points towards a sharp increase in implied volatility. The OVX, which measures oil price volatility, has already crept up to 41, and a direct conflict could easily see it surge past the highs we saw during the regional flare-ups in 2025. Buying call options on crude oil, or on volatility itself, are becoming key strategies to hedge against or speculate on a price spike.
We only need to look back to the market reaction in 2022 following the conflict in Ukraine to understand the potential scale of such a move. That event showed how quickly geopolitical shocks can re-price global energy, sending Brent crude over $120 a barrel. An actual conflict in the Persian Gulf would have a far more direct and explosive impact on crude prices.
This risk is not confined to oil, as LNG prices would almost certainly spike in tandem. With Europe still heavily reliant on LNG imports, any threat to Qatari shipments passing through Hormuz poses a direct threat to its energy security. We therefore expect a surge in options buying on natural gas futures as traders prepare for all outcomes.
