The US Treasury Department revoked a general licence allowing Iranian crude oil sales, reversing the waiver 19 days after it was issued and just hours after three tankers were struck in the Strait of Hormuz. The licence had been granted in June under a 14-point memorandum of understanding that reopened the strait and initially permitted sales through 21 August; Treasury has now ordered transactions to be unwound by 17 July. Iran is estimated to have shipped roughly 50 million barrels via a shadow fleet in June, while talks are shelved until at least 18 July.
Oil prices repriced quickly. Brent rose 5.22% to close at 75.86, and West Texas Intermediate gained 5.00% to settle at 72.05, with most of the move coming shortly after 18:30 GMT; Tuesday highs were 76.22 and 72.33, while session lows printed at 72.14 and 68.63. Traders are also watching the 200-day Exponential Moving Averages at 81.79 for Brent and 77.42 for WTI, with nearer support at 74.00 and 70.50, alongside a daily Stochastic Relative Strength Index turning higher from oversold on both benchmarks.
Geopolitical Risk and Market Outlook
The revocation of Iran’s oil waiver has completely reset our short-term outlook. We are now forced to treat the fourteen-point ceasefire framework as fragile, with a high probability of collapse. The market’s 5% surge yesterday tells us the geopolitical risk premium is back, and we expect it to grow.
We see the coming weeks as a period of escalating tension, making long volatility positions attractive. The CBOE Crude Oil Volatility Index (OVX) likely jumped significantly yesterday, and we anticipate it will remain elevated as the market prices in the risk of a naval blockade. Historically, similar escalations in the Strait of Hormuz, through which about 21% of global oil consumption passes, have led to sustained volatility.
Trading Strategy and Key Variables
Our strategy is to position for asymmetric upside risk before the July 17th deadline for unwinding transactions. We are buying out-of-the-money call options on WTI and Brent for August expiration, specifically targeting strikes above the 200-day moving averages near $77 and $82, respectively. This mirrors the market reaction following the 2019 attacks on Saudi oil facilities, which caused Brent to spike nearly 15% in a single session.
The key variable remains enforcement, and we are not waiting for clarity from Washington. Iran’s shadow fleet exported over 1.6 million barrels per day last month, and a blockade to halt those flows would significantly tighten global supply. Any headline suggesting a U.S. naval presence is being reinforced will be our signal to add to bullish positions.
For now, we will use the consolidation shelves around $70.50 on WTI as our line in the sand. As long as the price holds above this level, our bullish bias is firm. A diplomatic breakthrough before July 18th is the only clear catalyst that would drive us to unwind these trades.
