Oil traders brace for extended Strait of Hormuz disruption
The probability of the US blockade being lifted by May 31 dropped 4¢ to 16¢, while the market for normal traffic by end of June sits at 28¢. Combined with WTI contracts pricing in a high likelihood of prices above $100, traders are betting on sustained supply risk.
Key takeaways
- 01
The probability of the US blockade being lifted by May 31 dropped 4¢ to 16¢, while the market for normal traffic by end of June sits at 28¢.
- 02
Combined with WTI contracts pricing in a high likelihood of prices above $100, traders are betting on sustained supply risk.
- 03
The oil market complex is flashing warning signs.
Full analysis
The oil market complex is flashing warning signs. The polymarket contract "Trump announces US blockade of Hormuz lifted by...?: May 31" (ticker 0x8b369e10358094a99f) fell 4¢ to 16¢ on 79,343 volume, indicating only a 16% chance of a resolution this month. Meanwhile, "Strait of Hormuz traffic returns to normal by end of June" (ticker 0x348cd9adf4f6855f58) is priced at 28¢, suggesting the market sees a 28% chance of normalization by June 30. This disruption is already reflected in WTI price level contracts: the binary "Will the WTI crude oil settlement price be above 103.99 USD/Bbl on May 18, 2026?" (ticker K | KXWTI-26MAY1814-T103) trades at 39¢ with a 1¢ spread and 43k volume, while the same question for May 19 at $95.99 trades at 90¢. The tight spreads on these Kalshi contracts make them attractive for hedging. The USO oil ETF was up 4.13% in traditional markets, confirming the bullish sentiment. If the blockade persists into June, expect further upward pressure on oil.
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sf book KXWTI-26MAY1914-T95.