WTI traded near $91.50 in Asian hours on Tuesday, staying subdued for a third day after reports that the US and Iran may hold further talks. The talks aim to secure a longer-term ceasefire before the current two-week truce ends.
US President Donald Trump said Tehran initiated contact with Washington, while Iranian President Masoud Pezeshkian said he is willing to continue dialogue within international law. US Vice President JD Vance said on Fox News that diplomacy is ongoing and that there has been progress, though no breakthrough.
Supply Disruption Keeps A Floor Under Prices
US Energy Secretary Chris Wright said energy prices may stay elevated and could rise until vessel traffic through the Strait of Hormuz returns to normal. He said continued disruption to the shipping route is supporting price pressures.
Trump also said high oil and petrol prices could persist through the US midterm election period. An OPEC+ report said the group’s output fell by 7.9 million barrels per day in March, largely due to the Strait of Hormuz shutdown.
Attention is also on the upcoming monthly International Energy Agency report for further supply and demand signals.
We are seeing the market caught between conflicting signals from Washington and the physical supply situation. While talk of a ceasefire is pulling prices down, the massive OPEC+ output reduction provides a strong floor. This tug-of-war is setting up a period of significant volatility for crude oil in the coming weeks.
Options Strategies For Two Way Volatility
This situation feels a lot like the uncertainty we saw back in late 2025 when concerns over the Strait of Hormuz first emerged. Implied volatility on WTI options is likely to surge, much like the oil volatility index (OVX) spiked over 60 during the initial phases of the Ukraine conflict in 2022. This makes outright directional bets expensive and risky for any trader.
Given this setup, we should consider strategies that benefit from a large price swing, regardless of the direction. A long straddle or strangle, which involves buying both a call and a put option, could be effective. This play profits if the price moves sharply up on failed talks or down on a breakthrough agreement.
The physical supply disruption at the Strait of Hormuz cannot be understated, as historically it handles over 20% of global oil consumption. The reported 7.9 million barrel per day output decline is a staggering figure, far exceeding the cuts seen during the 2020 pandemic demand collapse. These supply fundamentals provide a strong argument against any significant price collapse unless a firm deal is signed and ratified.
The political calendar, specifically the upcoming US midterm elections, adds another layer of complexity for the administration. There will be immense pressure to see gasoline prices fall, which could push for a faster resolution with Iran. Traders should watch for any shifts in rhetoric from US officials as a leading indicator of a potential deal.
