Reuters reported on Sunday, citing a Tehran Times post on X, that the IRGC Navy used VHF radio to state that no vessels are permitted to cross the Strait of Hormuz. Reuters also reported that an official from the EU naval mission Aspides said ships have received VHF messages from Iran’s Revolutionary Guards that “no ship is allowed to pass the Strait of Hormuz.”
The Strait of Hormuz is a key route for global oil trade. A closure could push oil prices higher.
Wti Basics And Market Role
WTI is a crude oil grade traded on international markets, with the name standing for West Texas Intermediate. It is one of three major benchmarks, alongside Brent and Dubai Crude, and is described as “light” and “sweet” due to low gravity and sulphur content.
WTI is produced in the United States and distributed via the Cushing hub, known as “The Pipeline Crossroads of the World”. WTI prices are often cited as a benchmark for the oil market.
WTI prices are mainly driven by supply and demand, with global growth affecting demand. Political instability, wars, sanctions, OPEC decisions, and US dollar moves can also affect prices because oil is usually traded in dollars.
Weekly inventory reports from the API and EIA can move prices, as inventory changes reflect supply and demand shifts. Their results fall within 1% of each other 75% of the time, and the EIA is described as more reliable.
Market Impact And Trading Signals
The announced closure of the Strait of Hormuz represents a major potential supply shock for global oil markets. We know that historically, about one-fifth of the world’s total oil consumption, approximately 21 million barrels per day, passes through this critical chokepoint. This sudden removal of supply will force an immediate and sharp repricing of risk for crude oil.
Given this geopolitical escalation, we should anticipate a significant increase in market volatility. The CBOE Crude Oil Volatility Index (OVX), which was hovering in the relatively calm mid-30s during February 2026, will likely spike above 50, reflecting deep uncertainty. This means the cost of options will surge, so traders should be prepared for much higher premiums on both calls and puts.
This supply crisis is amplified by the market conditions we saw developing through late 2025. After prices softened in the fourth quarter of 2025 due to concerns over slowing economic growth in Asia, OPEC+ agreed in their December 2025 meeting to extend production cuts into the middle of this year. This leaves very little spare production capacity available to offset the loss of oil transiting Hormuz.
The upcoming weekly inventory reports from the API and EIA are now critically important. Last week’s EIA report, for the week ending February 27, 2026, already showed a surprise draw of 2.8 million barrels, signaling a tighter market than many had anticipated. If we see further significant draws in inventories, it will confirm the supply deficit and could propel prices even higher.
We should also watch the price difference between Brent Crude and WTI. Brent is more directly exposed to Middle Eastern supply disruptions, so we expect the Brent-WTI spread to widen sharply from the $5 average we observed in January and February 2026. This widening spread offers a distinct trading opportunity separate from the outright direction of oil prices.
