WTI traded lower for a third day but without strong follow-through. It was just below $88.00 in the Asian session, down about 0.40%, after rebounding from sub-$85.00, a more than three-week low.
Prices were pressured by expectations of easing US-Iran tensions and a possible extended ceasefire. US President Donald Trump said the war with Iran may be nearing an end, and the White House said it was optimistic about a deal, with reports of a second round of talks within days.
Downside moves were limited by risks around the Strait of Hormuz and ongoing regional tensions. Iran set a condition for more talks, while Israel’s Prime Minister said there was no commitment to a ceasefire and the IDF was told to expand the security zone.
The US naval blockade of Iranian ports was reported as fully implemented after the Islamabad talks ended last Saturday. Iran’s joint military command said trade in the Gulf could be halted if the blockade is not lifted, raising supply disruption risks.
WTI is a US crude benchmark, and its price is driven mainly by supply and demand, geopolitics, the US dollar, OPEC decisions, and weekly API and EIA inventory reports. API data is released Tuesday, EIA Wednesday, and their results are within 1% of each other 75% of the time.
The tension we saw in 2025 between Iranian diplomacy and Hormuz risks is still defining the market. However, the scales have clearly tipped toward geopolitical risk, holding WTI above $92 per barrel as of today, April 16, 2026. This suggests the market is pricing in a higher probability of supply disruption than it was a few months ago.
Those earlier hopes for a US-Iran deal have faded as the naval blockade continues and talks remain stalled. The Strait of Hormuz remains a critical chokepoint, and any escalation there would immediately threaten the roughly 17 million barrels that pass through daily. We see this reflected in a persistent $5-7 risk premium currently embedded in the price.
On the fundamentals side, demand signals are surprisingly strong, which was not the case last year. This week’s EIA report showed a surprise draw of 2.1 million barrels, and China’s manufacturing PMI for March came in at a robust 51.2. This data counters any bearish sentiment based solely on stalled diplomacy.
Despite this, we cannot ignore the potential for a sudden diplomatic breakthrough, which would quickly erase the current risk premium. Furthermore, while OPEC+ is holding production cuts, we are tracking compliance issues from several key members, which could add supply back to the market unexpectedly. This uncertainty helps explain why prices have not yet broken out above $95.
This push-and-pull creates an environment of high volatility, making outright directional bets risky. We see better opportunities in options, as implied volatility is elevated near 35% for front-month contracts. Traders should consider strategies that profit from significant price swings rather than picking a firm direction.
A weakening US Dollar is also providing a tailwind for crude prices. The Dollar Index has slipped to around 103.5, making oil cheaper for buyers using other currencies and adding to the demand-side support. This factor should not be overlooked as it quietly supports the current price floor.
