Iran-Strait of Hormuz tensions deflate as traffic normalization odds slip
The probability of Strait of Hormuz returning to normal by end of May dropped 4¢ to 12¢, and Trump’s announcement of lifting the blockade fell 2¢. Traders are pricing in prolonged disruption, which supports oil prices.
Key takeaways
- 01
The probability of Strait of Hormuz returning to normal by end of May dropped 4¢ to 12¢, and Trump’s announcement of lifting the blockade fell 2¢.
- 02
Traders are pricing in prolonged disruption, which supports oil prices.
- 03
Iranian geopolitical risk remains the dominant factor in oil and macro markets today.
Full analysis
Iranian geopolitical risk remains the dominant factor in oil and macro markets today. The most liquid contract, 'US x Iran permanent peace deal by June 30', sits at 39¢ with tight spread and high volume (387k). The notable mover is the 'Strait of Hormuz traffic returns to normal by end of May' contract, which fell 4¢ to 12¢ on volume of 378k. This drop signals that traders expect no near-term de-escalation, consistent with the US maintaining its blockade. Simultaneously, 'Trump announces US blockade of Hormuz lifted by May 15' dropped to 3¢ (-2¢). These moves together suggest the market is bracing for extended disruption, which directly feeds into oil price expectations. The WTI crude $120 contract jumped 6¢ to 48¢. Key contracts to watch: 'Strait of Hormuz traffic returns to normal by end of June' (34¢, -8¢) for a next-month view, and 'Iran agrees to end enrichment of uranium by June 30' (28¢, +1¢). The 'Iran coup attempt by June 30' (13¢, +1¢) also shows slight upward drift. Traders should monitor for any diplomatic breakthrough that could reverse these trends.
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