US President Donald Trump said the US Navy has cleared mines from the Strait of Hormuz, easing one of the supply concerns that has kept the oil market tense. Writing on Truth Social, he said he had been told all mines in the waterway’s international waters had either been removed or detonated, and that Iran had been warned against further mine-laying, with the US prepared to respond with force.
Trump described a “zero-tolerance policy”, saying any ship or boat placing new mines would be “immediately and systematically destroyed”. He also said the US is monitoring the strait via Space Force, alongside Iran’s Pickaxe Mountain site and three nuclear facilities he said had already been destroyed.
Geopolitical Risk Premium and Oil Prices
With the Strait of Hormuz now declared clear of mines, we expect a sharp drop in the geopolitical risk premium that has propped up crude prices. Historically, threats to this vital waterway—which carries roughly 20.5 million barrels of oil per day, or about a fifth of global liquid petroleum consumption—can easily bloat oil prices by $5 to $10 a barrel. As this immediate threat dissolves, crude oil futures are highly likely to face strong downward pressure in the coming weeks.
Trading Strategies Amid Easing Threat
We recommend that derivative traders position for a decline in oil’s implied volatility, which spiked during the recent blockade scare. Traders should look into selling out-of-the-money call options or buying bear put spreads on West Texas Intermediate (WTI) to capitalize on falling prices. This “volatility crush” is a classic reaction when a major supply bottleneck is suddenly cleared and the market breathes a sigh of relief.
However, because the new zero-tolerance policy threatens immediate military action if any new mines are laid, we must prepare for sudden, extreme volatility spikes if tensions flare up again. To hedge against this, we advise using risk-defined strategies like iron condors or vertical spreads rather than naked short options. These capped-risk strategies will protect your capital if unexpected military conflict in the Middle East instantly disrupts the global energy supply once more.
