The crude oil market is undergoing a significant change! The risk of Iran triggering an "upward insurance" buying frenzy. Trading volume for Brent oil call options hits a record high.

Due to increasing concerns over escalating protests in Iran and potential military strikes by the US government leading to a complete interruption of crude oil supply, traders in the crude oil futures market are queuing up at unprecedented speeds to purchase hedging tools to guard against a short-term surge in international oil prices. The trading volume of bullish crude oil options has quickly surged to record highs. Following a significant increase last Friday, bullish option trading in Brent crude oil on Monday experienced its busiest single-day trading in history. Implied volatility and premiums for bullish bets on crude oil have continued to rise since the weekend and have both reached their highest levels since the US and Israel bombed Iran in June of last year, indicating a rising demand in the market for upward protection. According to preliminary statistics from ICE Futures Europe, on Monday a record high number of over 556,000 bullish options contracts changed hands, with a focus on large price spread trades in near-term contracts, making bullish option trading in the oil market a relatively cheap and increasingly popular bet: that if a supply interruption were to occur, oil prices could suddenly surge. As shown in the above chart, volatility in the crude oil market has skyrocketed, with the key indicator of volatility rising to its highest level since the US and Israel launched attacks against each other in June. Since last Wednesday, Brent crude oil futures prices for delivery in 2025, which were previously seen by Wall Street analysts as the "weakest commodity of 2026" due to oversupply pressures, have surged by over 6%. This is partly due to the escalation of protests in Iran, OPEC's fourth-largest oil-producing country, and the looming threat of supply disruptions from the Trump administration, compelling traders to cover significant short positions established early this year due to expectations of oversupply. During the early hours of trading in the Asian session on Tuesday, Brent crude oil prices continued to rise, hovering around 64 US dollars, still at their highest level since December. While Iranian authorities claim that the situation has returned to calm, the risk of strikes by oil workers or protesters on energy infrastructure in the region continues to escalate. Traders' concerns about the supply side have offset market expectations of increased production in Venezuela, which is preparing to resume exports following political changes in Caracas. Record-high trading volume for bullish crude oil options, as traders sweat over geopolitical risks in Iran Tehran claimed on Monday that protests had been quelled, but unrest appears to persist. Meanwhile, some US media outlets cited knowledgeable US officials reporting that President Trump is inclined to launch a new round of domestic strikes against Iran. With the US response still uncertain, options derivatives provide flexible hedging mechanisms for multiple outcomes, including military escalation, or supply interruptions due to protests by Iranian oil workers. In a combination trade of 74 US dollars/78 US dollars and 90 US dollars/100 US dollars set to expire in April, the equivalent of around 40 million barrels of futures contracts changed hands in a single transaction an absolutely massive transaction by the standards of the oil options market. Before the close of the oil trading market on Friday, there were also significant bullish spread combinations, including a combination of 50 million barrels in the May 74 US dollars/78 US dollars spread, which proved to be an early indication of the explosive growth in bullish option trading in the oil market on Monday. The skewness of the second-month option on global benchmark crude oil prices Brent crude oil futures prices (used to measure the relative cost of hedging against increases compared to decreases) has undergone a significant shift since last week towards bullish option combinations. This is a relatively rare state of market balance, typically seen in periods of heightened geopolitical pressure. This surge highlights a sudden reversal in market sentiment compared to the beginning of the year. At that time, prospects for a resurgence in Venezuelan production, combined with expectations of increased global supply, exacerbated bearish sentiment towards crude oil prices. Energy consulting firm Energy Aspects wrote in a research report that traders' long gamma exposure in recent weeks had restricted the range of price fluctuations. However, there has been a noticeable shift in positions in the options market, with a significant influx of bullish options, causing some traders to switch to a "short gamma" position, thereby significantly removing factors that had been suppressing volatility. Trump aims to impose 25% tariffs on Iranian buyers Furthermore, Trump's pledge to impose tariffs on Iranian buyers has also been a significant factor driving crude oil prices to their highest levels in a month. After President Donald Trump announced plans to levy a 25% duty on anyone doing business with Iran and emphasized that such tariffs would "come into effect immediately, oil prices continued to rise, reaching their highest levels since early December. Following a cumulative gain of over 6% in the previous three trading days, West Texas Intermediate crude oil (WTI crude oil prices, the North American crude oil pricing benchmark) climbed to nearly $60 per barrel, while Brent crude closed below $64 on Monday. Trump stated on social media that new tariffs on any Iran buyers would "come into effect immediately, but did not specify the extent or details of the tariff charges. Any new tariff measures by the US government could reignite a trade war with China, the world's largest importer of crude oil and a long-term top buyer of Iranian oil. Protests in OPEC's fourth-largest oil-producing country have further intensified traders' concerns about supply disruptions, prompting oil traders to purchase hedging tools at unprecedented speeds to prevent a sharp surge in oil prices in the short term. With Iran accounting for about 2% of global daily crude oil exports, the significant threat of a potential interruption in its exports has greatly eased concerns about an imminent oversupply of global crude oil. Previously, prices in the global crude oil futures market had been on a downward trend since mid-June 2025 amid continued expectations of oversupply. The latest market data shows that crude oil inventories at a major export terminal in Iran have decreased by about one-fifth since the beginning of the year, which may indicate that the country is transferring oil in the midst of turmoil to avoid losses, or it may indicate that energy infrastructure has been attacked in protests, leading to a reduction in production capacity.