Traders bet on Brent surge to $150 as Hormuz disruption fuels volatility

Traders are sharply increasing bets that Brent crude could surge to at least $150 a barrel by the end of April, as the ongoing Middle East conflict continues to disrupt supplies through the Strait of Hormuz.

Brent crude, currently trading around $107 a barrel for May delivery, has risen nearly 50% since February 28, when the U.S.-Israeli war against Iran began, effectively blocking oil transit through the strategic waterway. Prices have remained highly volatile despite tentative signs that Washington and Tehran may be exploring ways to de-escalate the conflict, Reuters reports. 

Options trading data indicates that bets on oil reaching at least $150 a barrel by the end of April have increased tenfold in recent weeks. Such a price would surpass Brent’s previous record high of $147 a barrel set in 2008, when surging global demand strained supply capacity.

Data from ICE shows that ownership of call options expiring at the end of April — which give holders the right to buy June Brent futures at $150 — has expanded to nearly ten times its level a month ago.

Open interest for April expiry $150 call options has climbed to 28,941 lots, each representing 1,000 barrels of oil. At current prices, that equates to nearly $3 billion worth of crude. A month ago, open interest in these contracts stood at 3,374 lots. The data does not specify how many investors hold the options or their identities.

Open interest in $160 call options has risen from zero to 14,676 lots, equivalent to roughly $1.5 billion of crude. Meanwhile, call options in the $200 to $240 range represent around $1 billion worth of oil, and there is even limited interest in $300 June call options.

Tim Skirrow, head of derivatives and energy at Energy Aspects, said: "These calls are clear signs that investors see tail risk outcomes to the current conflict and are increasingly trying to manage those outcomes. $150 a barrel oil will certainly cause a demand shock but as long as oil cannot flow out of the Gulf there will be risks of outright shortages."

Despite the surge in high-price bets, the largest open interest remains concentrated in $100 call options, with 61,594 lots outstanding.

By Sabina Mammadli