US President Donald Trump said on Sunday he would not rule out further strikes on Iran before the midterm elections, according to Fox News. He said he expected the war to be won “very soon” and linked that outcome to a fall in oil prices, arguing crude would drop “way down” to levels seen before the conflict. Trump also reiterated that Iran would not be allowed to obtain a nuclear weapon, framing nuclear deterrence as central to US aims.
Separately, Iran’s Persian Gulf Strait Authority (PGSA) issued a warning to shipowners against using “unauthorised” routes through the Persian Gulf and the Strait of Hormuz, and said there would be consequences for shipping companies that failed to comply. In markets, West Texas Intermediate (WTI) was up 0.72% on the day at $92.00 at the time of writing.
Energy Markets Face Heightened Volatility
With WTI crude hovering around $92.00 and rhetoric escalating, we must brace for heightened market volatility in the coming weeks. Given the threats to shipping routes in the Strait of Hormuz, through which roughly 20% of the world’s liquid petroleum flows, immediate supply disruptions are a highly credible risk. We recommend buying short-term call options on WTI to capitalize on potential price spikes if military action commences.
During previous Middle East escalations, such as the geopolitical shocks of 2022, global oil benchmarks rapidly surged to nearly $139 per barrel. If the United States conducts further strikes, we anticipate WTI could quickly test the $100 resistance level. Traders should look at bull call spreads to limit premium costs while positioning for this rapid upward momentum.
Strategic Trading Amid Uncertainty
Conversely, we must prepare for the possibility of a swift resolution that could send oil prices plunging back to baseline levels. To hedge against a sudden de-escalation, we suggest utilizing long strangle strategies that profit from extreme price swings in either direction. Implied volatility in energy derivatives is still adjusting, meaning these dual-directional options remain relatively affordable for now.
We must also monitor the maritime shipping sector, as threat warnings in the Gulf will likely drive up insurance premiums and tanker freight rates. Trading derivatives on maritime freight futures or buying calls on energy-heavy indices offers an alternative way to exploit these transport bottlenecks. We will continue to track daily tanker transit volumes to gauge the real-world impact of these shipping warnings.
