Strait of Hormuz Risk Drives Oil Surge After US Iran Strikes

Oil jumped 2.9% this week after US strikes on Iran, as covered in Oil Jumps 2.9% as US Strikes on Iran Threaten Supply. The move brought the Strait of Hormuz back into focus. The waterway carries about a fifth of the world's oil output. A sustained closure would push prices sharply higher.

Tanker rates have ticked higher. War risk premiums are widening, shipping brokers said. Some vessels are rerouting via the Cape of Good Hope, adding 10-15 days to voyages. That tightens available supply and raises freight costs.

Brent crude and WTI are the most direct exposures. Asian and European refiners that rely on Middle Eastern crude face the highest operational risk. Strategic petroleum reserves in the US and elsewhere provide a buffer, not an unlimited one.

A missile strike that forces a temporary closure of the strait would trigger a supply shock, traders said. That could lift Brent above $100 a barrel. A diplomatic breakthrough or a coordinated release of strategic reserves would cap the price spike.

The next catalyst is a scheduled meeting of the Joint Commission on the nuclear deal. That could reduce tensions or collapse further. The US military posture in the region has been reinforced, raising the risk of miscalculation.

Many traders are already long options that pay off on a sharp spike. The risk is a false alarm that leaves those options expiring worthless. The spread between prompt and deferred Brent futures is worth watching. A widening contango suggests the market expects a short-lived disruption. A shift to backwardation signals a more lasting supply loss.

For traders looking to position, the best commodities brokers offer access to futures and options. The US strategic petroleum reserve holds about 375 million barrels, enough to cover roughly 30 days of imports from the Gulf. That cushion is thinner than it was a decade ago.