Oil traders are paying a premium for bullish call options for the longest stretch in about 14 months as they huddle in the options market to protect against the risk of a new confrontation between the US and Iran.
The global Brent benchmark has registered a call skew for 14 consecutive sessions, while the equivalent US marker has seen such a pattern for the 13 most recent trading days. Those are the longest stretches since late 2024, when Israel launched attacks on Iranian military installations.
Thousands are estimated to have been killed in the recent wave of unrest to challenge Supreme Leader Ayatollah Ali Khamenei and his regime, sparking an international outcry, including warnings from US President Donald Trump of “strong action” if the killings did not stop. Trump said this week that the US has a “big armada” headed to the Middle East because of Iran, but added that he hoped the US won't have to use it.
Options markets have been the main way traders have wagered on heightened geopolitical risk in the Middle East in recent years, in a period that started with Hamas's attack on Israel in October 2023. When the US struck Iran last year, premiums for calls spiked and then collapsed after it became apparent that oil facilities had been spared.
“The focus on Iran continues,” said Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management. “The market will likely remain nervous over the coming days.”
The uncertainty is leading to chunky additions of bullish options contracts. Open interest in Brent call options has accrued at the fastest pace this month in at least six years, according to Bloomberg calculations of ICE Futures Europe data. It follows the busiest ever day of Brent crude call options trading earlier this month.
Hedge funds have also boosted net-bullish wagers on crude to the highest since August, while several volatility gauges also hit multimonth highs over the past few weeks.
A possible American intervention stands to disrupt the OPEC producer's roughly 3.3 million barrels-a-day oil production. Consultant Rapidan Energy Group recently raised the odds that an Iranian retaliation to potential US strikes would result in a substantial disruption in Gulf energy flows from 15% to 20%.
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