NYMEX-traded West Texas Intermediate (WTI) was 0.9% lower at about $79.00 during Thursday’s European session, even as it remained close to Tuesday’s monthly high of $80.61. Price action came as attention stayed on risks to crude flows through the Strait of Hormuz and on Washington’s stance towards Tehran.
The US blockade on Iranian seaports was described as constraining energy supply, while Iranian forces were reported to be attacking cargos attempting to transit Hormuz without permission. Iranian state media IRNA cited an army spokesperson saying the US continues to attack several areas and warning the war could spread to new arenas. Separately, US President Donald Trump said in a Fox News interview that he would authorise strikes on Iran’s bridges and power plants next week if negotiations do not resume, with a further speech due on Friday.
Geopolitical Risk Premiums And Strategy Recommendations
With West Texas Intermediate (WTI) holding firm near $79 and eyeing its monthly high of $80.61, we believe derivative traders must prepare for heightened volatility in the coming weeks. The escalation of US-Iran tensions, particularly the threat of US military strikes on Iranian infrastructure next week, presents a classic geopolitical risk premium. We recommend positioning for sudden upward price spikes while protecting against sharp reversals following President Trump’s upcoming Friday speech.
Impact Of Strait Of Hormuz And Tactical Approaches
Because the Strait of Hormuz handles approximately 20 million barrels of oil per day—nearly 20% of global liquid petroleum consumption—any sustained conflict will severely choke global energy supplies. Historically, sudden military escalations in this vital corridor have triggered immediate 10% to 15% surges in crude prices, which rapidly inflates option premiums. We suggest buying short-term out-of-the-money call options or utilizing bull call spreads to capitalize on this explosive upside potential with capped risk.
We must also closely monitor the implied volatility (IV) of WTI options, which is bound to surge ahead of the weekend. To exploit this expected premium expansion, traders can look at long straddles to profit from a massive breakout in either direction once the market digests Friday’s address. Keeping positions highly flexible and risk-defined is crucial as the market prices in the very real potential for US airstrikes next week.
