Insights 
VT 
Analysts have responded to recent developments concerning Trump’s actions towards Iran. JP Morgan noted that previous regime changes in the region have often caused oil prices to increase by up to 76%, with an average rise of 30% over time.
Trump mentioned the possibility of regime change in Iran, though some within his administration have denied this being an objective. ANZ foresees the likelihood of Iran retaliating by disrupting oil flows from the Middle East, potentially pushing prices to the $90–95 per barrel range.
There is a consensus that closing the Strait of Hormuz is almost impossible for Iran. However, this does not rule out possible disruptions in oil transportation.
Market Responsiveness To Potential Regime Change
In plain terms, here’s what we’ve seen: Trump’s recent remarks hint at potential regime change in Iran, which has unsettled markets. While some officials tried to water this down, the words have already stirred concern. Looking at historical patterns, strategists at JP Morgan have pointed out that such statements—in similar past situations—have frequently led to soaring oil prices, sometimes by more than two-thirds. On average, prices tend to climb by close to a third whenever tensions flare up around leadership instability in that part of the world. That’s not a small shift by any stretch.
Then there’s ANZ’s view. They’re not mincing words—they expect Iran could retaliate by targeting the way energy moves out of the region. This doesn’t mean closing off shipping routes completely, as that’s generally deemed unrealistic. Still, even minor interference—random attacks, delays in cargo, or added checks—could be enough to shake markets. They suggest oil could shoot up to the mid-$90s if supply routes come under pressure, even temporarily. That’s especially relevant to us given recent volatility in crude futures.
While it may be technically far-fetched for Iran to fully block the Strait of Hormuz, history has shown that it doesn’t take a full closure to cause ripples. Small incidents—like missile tests or interfering with tankers—can trigger traders to price in worst-case scenarios. In that region, perception quickly filters into demand for hedging, which then sends price estimates up almost reflexively.
Strategic Moves In Response To Market Shifts
So what do we do here? We’ve seen that forward contracts, particularly for Brent, are starting to show a steeper curve. That tells us there’s increased worry about future availability. Implied volatility has picked up. Even CDS spreads on Middle Eastern sovereigns are beginning to widen, albeit slowly. These aren’t random moves; they’re measured steps by markets anticipating geopolitical risk.
Market participants looking to position ahead would do well not to ignore spread moves between Brent and WTI, as these have historically widened during times of Middle East instability. We’re already seeing early signs of this. Similarly, long-dated options are pricing in higher event risk. That’s not something we’re seeing in isolation—it’s aligned with past moves during Iraq tensions, Syria’s chemical weapons episode, and even during Libya’s supply outages years ago.
Instead of assuming this will blow over because the Strait hasn’t been shut, attention should focus on freight rates and insurance premiums for tankers in the Persian Gulf. Those are among the first real-world costs to rise when a situation like this unspools further. The moment a second-tier news event spurs vessel re-routings or schedule delays, the shift tends to hit commodities traders quickly, particularly those running algorithms tied to shipping data.
Watch for updates in open interest data. If speculative length in crude futures picks up steeply while commercial hedging lags, we could end up front-loading gains before any hard data confirms disruption. We’ve seen this before—a sort of pre-emptive pricing of doom that doesn’t always correct in time. You don’t need a full pipeline shut or dock attack to trigger a reposition.
We should also keep an eye on fuel oil cracks and middle distillates. If refiners begin signalling tighter margins through changes in run rates or crack spreads, that’s another early warning of stress along the supply chain. It adds to the case that this isn’t noise—it’s traders reassessing risk premia based on real potential changes to delivery timelines and input costs.
It’s moments like this when clear signals can get buried in the rush of headlines and reaction. But if we read the tape carefully—watching not just prices but flows and premiums—we can avoid being caught on the wrong side of swift moves. The market is predictable in how it reacts to these kinds of events, even if the events themselves are not.
Risk management models should be recalibrated accordingly, especially if delta-hedging strategies aren’t yet accounting for the recent spike in backwardation. Passive exposure to energy-centred indices will not provide insulation here—particularly if those indices are weighted towards spot instruments. Look at where your risk is most concentrated not just in price terms, but in terms of time-to-delivery.
There’s a tight window here to act before thinner summer liquidity sets in. That always makes Theta burn tougher and price swings wider. Act on structure, not sentiment.
