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Oil prices jumped after President Donald Trump reinstated the blockade on the Strait of Hormuz. The move follows the latest rounds of strikes between Iran and the U.S. over the weekend. The volatility is creating a unique opportunity in the options market.
The United States Oil Fund (USO)
, the ETF that best tracks oil prices, offers equity options traders a liquid, accessible alternative to the complexities of the futures market. Although uncertainty in the Gulf is creating near-term volatility, longer-term crude is structurally likely to face some upside resistance as well, presenting an ideal setup for premium sellers looking to exploit elevated options prices.
On the downside, a structural floor persists as protracted conflicts in the Middle East continue to strain global oil supply chains and distort transit routes. Compounding this tight physical reality is the status of the U.S. Strategic Petroleum Reserve (SPR). Following massive drawdowns by the Biden administration ahead of the 2022 midterm elections, the SPR was already at multi-decade lows before the Trump administration depleted it further to offset the squeeze Iran put on oil exiting the Persian Gulf during the latest war. With the government fundamentally needing to refill the reserve rather than drain it further, the SPR has transformed from a political tool for price suppression into a major backstop against sharp declines in crude oil prices.
