WTI rose by over 10% after two days of losses and traded near $103.80–$104.00 a barrel during Asian hours on Friday. The move followed a reassessment of supply risks linked to conflict in the Persian Gulf.
Donald Trump gave no details on reopening the Strait of Hormuz and warned of intensified military action over the next two to three weeks. He also referred to the destruction of a bridge in Tehran and warned Iran to reach a deal.
Supply Risks Reassessed
Iran’s Foreign Minister Abbas Araghchi said US strikes on civilian infrastructure would not lead to a retreat. He made the comments after the latest US action.
Prices briefly eased after reports that Iran and Oman are working on a protocol to monitor transit through the Strait of Hormuz. Iranian official Kazem Gharibabadi said tanker movements should be supervised and coordinated by both countries, according to IRNA.
The UK is holding talks with multiple countries on securing passage. OPEC+ is weighing a possible output increase, though extra supply is not expected to affect markets in the near term.
WTI stands for West Texas Intermediate and is a US-sourced crude benchmark traded via the Cushing hub. WTI prices are driven mainly by supply and demand, geopolitics, OPEC decisions, the US dollar, and weekly API and EIA inventory reports.
Key Market Drivers
API reports are published on Tuesdays and EIA reports the day after. Their results fall within 1% of each other 75% of the time.
We remember looking at the events of last year, when threats in the Persian Gulf sent WTI prices surging over 10% to nearly $104 a barrel. That situation was a clear lesson in how geopolitical headline risk can create extreme short-term volatility. It shows just how quickly fears of a supply disruption can drive the market, regardless of other factors.
Today, with WTI currently trading near $82.50, we see a similar setup emerging with renewed tensions in West Africa that threaten Nigerian production. While this is not the Strait of Hormuz, the potential for supply shocks remains, especially as the latest EIA report this week showed an unexpected inventory draw of 3.1 million barrels. This underlying tightness means any disruption could have an outsized impact on price.
For the coming weeks, a sharp rise in implied volatility on near-term options, now above 45%, suggests the market is bracing for a move. Buying call options or bull call spreads on WTI for May delivery could be a strategy to position for a potential spike if the situation escalates. This approach allows for participation in the upside while defining the maximum risk.
However, we also saw in 2025 how quickly prices pulled back on whispers of diplomatic talks or a potential OPEC+ output increase. Given that OPEC+ has signaled it will wait until its June meeting before considering production changes, traders might also consider selling out-of-the-money puts to collect premium. This move bets that strong underlying demand will provide a floor for prices above the $78 level, even if the geopolitical risk fades.
