US President Donald Trump said on Truth.Social that a blockade on ships entering or leaving Iranian ports will start today, April 13, at 10:00 AM ET (14:00 GMT).<\/p>\n
The post stated the United States would enforce the blockade from that time.<\/p>\n
After the post, there was no immediate movement in the US Dollar (USD) or WTI oil prices.<\/p>\n
The information had already been shared earlier in the day by the US Central Command (CENTCOM).<\/p>\n
The market may seem calm now, but this is deceptive. We should anticipate a significant spike in implied volatility for oil contracts over the coming weeks as the blockade’s real-world impact begins. The Cboe Crude Oil Volatility Index (OVX), which has been trading near yearly lows, is likely to surge, making long volatility strategies attractive.<\/p>\n
This blockade directly threatens the Strait of Hormuz, through which about 21 million barrels of oil, or 20% of global supply, pass daily. We are positioning for a potential price shock by buying out-of-the-money call options on Brent futures, which are more sensitive to Mideast tensions than WTI. Looking back at the market’s reaction in 2019, when attacks on Saudi facilities caused Brent to jump nearly 20% in a single day, shows how quickly the situation can escalate.<\/p>\n
The immediate removal of Iran’s roughly 2.5 million barrels per day of exports from the market will tighten global balances considerably. We are closely watching statements from OPEC+, as their limited spare production capacity, estimated at under 4 million bpd, might not be enough to calm fears of a shortage. Any hesitation from them to increase output will add fuel to the bullish case for crude prices.<\/p>\n
We are also looking at the Brent-WTI spread, which we expect to widen significantly as the risk is concentrated in the Eastern Hemisphere. Derivative plays on major tanker operators are now on the table, as their insurance and operational costs will soar due to the heightened risk. Similarly, call options on major defense contractors could prove profitable if the military standoff persists.<\/p>\n
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