WTI extended losses during European trading on Tuesday, hovering around $90.20 a barrel after giving up earlier gains. Prices softened after Kyodo News reported that Iran had offered to reopen the Strait of Hormuz within seven days, contingent on the United States taking initial steps to reduce economic and military pressure. The proposal was relayed to Washington via third-party intermediaries as leaders convene for the United Nations General Assembly in New York, where Iranian officials are seeking engagement with mediator nations to ease tensions and restart broader talks.
Attention is also on US President Donald Trump’s address to the UN, with his schedule flagged to include a potential side meeting with Iranian President Masoud Pezeshkian and separate talks with China’s President Xi Jinping and Gulf leaders. The administration has also floated a $5 billion fund for reconstruction across the Middle East. Meanwhile, supply concerns eased after weekend transits through Hormuz, with Saudi Arabia moving crude at 2.9 million barrels per day over the past six days, while satellite images showed supertankers totalling 14 million barrels of capacity at Saudi Gulf terminals; the tanker count was the highest since at least June. Brent briefly dipped below $100 a barrel and was down 3.40%.
Short-Term Trading Outlook Amid Diplomatic Developments
We advise derivative traders to prepare for short-term downward pressure on West Texas Intermediate (WTI) as it tests key support levels near $90. Historically, oil prices exhibit high volatility during the UN General Assembly, with diplomatic breakthroughs often triggering sharp sell-offs. Given Iran’s conditional offer to reopen the Strait of Hormuz, we recommend initiating short positions or buying put options to capitalize on this softening momentum.
Physical Market and Hedging Strategies
The physical market is already showing signs of easing congestion, as evidenced by Saudi Arabia’s recent shipment of 2.9 million barrels per day through the vital strait. This is backed by historical data from the U.S. Energy Information Administration, which notes that the Strait of Hormuz typically handles over 20 million barrels per day, making any sign of its reopening highly bearish for crude premiums. Furthermore, the record presence of supertankers holding 14 million barrels at Saudi ports suggests that supply is ready to flow the moment diplomacy progresses.
Because geopolitical negotiations can pivot rapidly, we must also protect against sudden upside spikes if talks between the US and Iran stall. Implied volatility in energy options tends to rise ahead of major leadership summits, making simple premium-selling strategies risky right now. We suggest implementing bearish vertical spreads or long straddles to manage the twin risks of a sharp diplomatic drop or a sudden escalatory reversal in the coming weeks.
