US Central Command (CENTCOM) carried out strikes on Iranian rocket launchers that were being readied to deploy mines into the Strait of Hormuz, according to Bloomberg on Sunday, ending several weeks of relative calm. Iran said it would retaliate, after describing the incident as a deadly attack.
The action marked the first US military move against Iran in more than a month. It comes as US President Donald Trump has shifted towards a campaign aimed at tightening pressure on Tehran’s economy.
Market Impact and Trading Recommendations
We expect immediate volatility in energy markets following this sudden military strike in the Strait of Hormuz, a crucial chokepoint that carries about 20 million barrels of oil daily. Derivative traders should prepare for a quick rise in Brent and WTI crude prices over the next few weeks. We recommend buying oil futures or call options now, as past conflicts in this region have rapidly pushed oil prices up by 10% to 15%.
Option Strategies for Geopolitical Uncertainty
To profit from this uncertainty, we suggest looking at short-term call options on crude oil to capture the initial price jump. We also expect the Crude Oil Volatility Index (OVX) to climb significantly, which makes buying volatility options a smart play. Historical data shows that threats to Hormuz shipping lanes quickly inflate option premiums, rewarding early buyers.
We should also protect our broader portfolios by purchasing put options on airlines and transport companies that will struggle with higher fuel costs. On the upside, we can target call options on major energy producers and maritime shipping firms that benefit from higher tanker rates. This balanced approach will help us navigate the geopolitical risks as we monitor how Iran responds.
