Traders are increasingly betting that Brent crude could surge to $150 a barrel by the end of April as the ongoing conflict in the Middle East continues to restrict oil flows through the Strait of Hormuz.
Brent crude for May delivery is currently trading around $107 a barrel, up nearly 50% since February 28, when US-Israeli military action against Iran began, effectively blocking transit through the key Gulf waterway. Prices have remained volatile despite cautious signals from Washington and Tehran suggesting both sides are exploring ways to end the confrontation.
Data from the Intercontinental Exchange (ICE) shows a sharp rise in options contracts, particularly those giving holders the right to buy June Brent futures at $150—so-called call options. Open interest in these contracts for April expiry has risen almost tenfold in recent weeks, from 3,374 lots to 28,941 lots, with each lot representing 1,000 barrels of oil.
“These call options are a clear sign that investors see the risk of extreme outcomes in the current conflict and are increasingly seeking to hedge against those scenarios,” said Tim Skirow, director of derivatives and energy at Energy Aspects. “Oil at $150 a barrel would certainly cause a demand shock, but as long as oil can’t leave the Gulf, there will be a risk of open shortages.”
Investors are also showing rising interest in higher-strike options. Open interest at $160 per barrel has climbed from zero to 14,676 lots, equivalent to around $1.5 billion of crude, while call options between $200 and $240 are valued at roughly $1 billion. There is even limited trading in options with a strike price of $300 for June delivery.
Despite the surge in high-strike bets, the largest volume of ownership remains in options to buy oil at $100 per barrel, reflecting continued hedging at current price levels.
The surge in options trading highlights market concerns over the impact of the conflict on global supply. The Strait of Hormuz, through which roughly a fifth of the world’s seaborne oil passes, has become a critical chokepoint. Analysts warn that prolonged closure or escalation could send oil prices to historic highs, surpassing the previous Brent record of $147 a barrel in 2008, when supply strains coincided with strong global demand.
The situation underscores the market’s sensitivity to geopolitical risk, as traders scramble to hedge against extreme price scenarios amid uncertainty over when the Gulf passage might reopen.
via Reuters
