Insights 
VT 
The price of US West Texas Intermediate (WTI) Crude Oil remains stable near $74.00. This is due to fears of US involvement in the Middle East conflict and potential supply disruptions. Verbal tension between US and Iranian officials has spurred concerns of a wider conflict, supporting Crude Oil’s price climb to four-month highs.
In the European morning session, WTI oil prices surpassed $73.00, with Nymex futures reaching $75.00. Over the last two weeks, oil prices increased by more than 20%, climbing from early May lows of $55. There is concern that Iran might block the Strait of Hormuz, pushing prices above $100.
Iran and the United Nations Warning
Iran’s ambassador to the UN warned of a strong response against US involvement, impacting Oil prices. He accused the US of supporting Israel’s actions and promised a proportionate response. Meanwhile, Trump demanded an unconditional surrender from Iran’s government.
WTI Oil, a high-quality Crude, is known for its low gravity and sulfur content. It is a key benchmark in the Oil market, influenced by supply-demand dynamics, geopolitical events, and decisions from OPEC. Inventory data from the API and EIA, as well as the US Dollar value, also affect WTI Oil prices.
In the past fortnight, we’ve seen prices not only regain lost ground but surge quite dramatically—by more than a fifth—suggesting a shift in sentiment driven firmly by political risk rather than market fundamentals alone. Tensions in the Middle East, especially verbal conflict between Tehran and Washington, have added considerable tailwind to the rally. These sorts of developments often drive sentiment before fundamentals catch up, and that’s precisely what seems to be happening now.
With the Strait of Hormuz featuring again in energy market discussions, it’s hard to ignore the fact that close to a fifth of global oil passes through this narrow channel. While the threat of restricted flow through Hormuz has hovered over markets for years, the present warnings—particularly those made by Iran’s UN ambassador—have been much more direct in tone. Any actual movement to blockade the area would disrupt volumes considerably and likely push prices up sharply and swiftly.
Volatility and Market Reactions
The jump in WTI to four-month highs, spurred in part by these worsening diplomatic exchanges, suggests a pivot in risk pricing, especially as options volumes across energy derivatives begin to climb. What we are witnessing, if looking closely, is a kind of hedging scramble—not just because of the potential denial of supply routes, but because speculative interest is merging with structurally tight markets already grappling with summer demand.
At the same time, Trump’s remarks—specifically his insistence on Tehran’s full capitulation—are introducing another layer of unpredictability. The approach has removed many of the more moderate elements from recent negotiations, and it’s this new posture that risks further escalation. As a result, pricing models that include a risk premium for geopolitical disruption may begin to find renewed relevance.
We’re also paying attention to the soft signals from forward curves. The backwardation that’s returning in parts of the oil futures market suggests traders expect tightness to remain, or worsen, in coming months. This shape—when near-term prices trade above longer-dated contracts—is often read as a sign of current supply stress or growing demand expectations.
Now, consider the timing of data releases too. Weekly US inventory figures from both API and the EIA are offering additional friction in price movements. Recent draws point to tightening domestic supply, and while one report alone doesn’t set the trend, multiple rounds of stockpile data indicating drawdowns could prompt continued bullish pressure. This, in combination with a softening US Dollar, nods toward an environment where upward bias in energy prices may persist unless political tension eases meaningfully—a situation we don’t envision resolving swiftly.
Meanwhile, we’ve noted that options markets, particularly around short-term WTI contracts, have seen implied volatility edge higher over recent days. That indicates growing uncertainty about near-term direction, with risk reversals beginning to favour call-side premiums again. This points toward stronger hedging demand from commercial participants expecting further upside risk.
In short, it’s not simply about today’s pricing near $74, or last week’s push toward $75. It’s about how both physical and paper markets are reacting to a confluence of diplomatic tension, supply route fears, and signals from derivatives markets that suggest higher volatility could be on the way.
For those trading in futures or managing exposure through energy-linked options, we believe considerable attention needs to remain on regional developments, as well as any shifts in language from US or Iranian officials—this isn’t a corner of the market where complacency pays. Keep pricing models dynamic and be quick to adjust volatility assumptions. The weeks ahead don’t appear likely to deliver calm.
