Oil prices posted their largest one-day gain in more than six years on Monday as renewed conflict in the Middle East and fresh US action against Iranian shipping prompted hedge funds and energy traders to reassess the likelihood of a prolonged disruption to global crude supplies, according to a report by the Wall Street Journal.
Brent crude rose 9.6% to settle at $83.30 a barrel, marking its biggest daily percentage gain since May 2020, while US West Texas Intermediate (WTI) climbed 9.4% to $78.14 a barrel after President Donald Trump announced the reimposition of a US blockade on Iranian shipping through the Strait of Hormuz.
The rally reflects growing market conviction that the vital shipping route is unlikely to return to normal operations anytime soon, despite a temporary easing of tensions earlier this summer.
The Strait of Hormuz normally carries around one-fifth of the world’s oil supplies, making it one of the most strategically important energy chokepoints. Market participants are increasingly pricing in a scenario where disruptions persist, supporting higher oil prices and renewed volatility across energy markets.
The shift in sentiment has revived what some Wall Street traders have dubbed the “NACHO” trade – shorthand for the view that there is “Not a Chance Hormuz Opens” in the near term. The strategy is based on expectations that restricted shipping through the strait will continue to tighten global supply and support elevated crude prices.
For hedge funds, the renewed geopolitical uncertainty creates opportunities across commodity trading, macro strategies and energy equities. However, recent positioning data suggests many speculative investors have reduced exposure after several months of sharp swings in oil prices, leaving overall market liquidity thinner than earlier in the year.
Analysts said the combination of lower speculative positioning and heightened geopolitical risk could amplify future price movements if hostilities escalate further.
Longer term, Gulf oil producers are accelerating plans to reduce their dependence on the Strait of Hormuz. Saudi Arabia, the United Arab Emirates and Iraq are investing in new pipeline infrastructure that would allow a greater proportion of exports to bypass the waterway.
According to Goldman Sachs, planned pipeline expansions could enable more than 45% of Gulf oil exports to avoid the strait by the end of 2027, with that figure potentially rising to 75% by the end of 2028 if projects are accelerated.
The renewed focus on alternative export routes reflects growing acceptance that the security risks surrounding the Strait of Hormuz are becoming structural rather than temporary. However, analysts caution that new pipelines would themselves require significant investment and remain vulnerable to attack.
Meanwhile, global oil producers outside the Gulf have continued increasing output. US shale producers, alongside exporters in Brazil, Kazakhstan and Venezuela, have stepped up production as Asian buyers diversify supplies and seek to reduce reliance on Middle Eastern crude.
China has been a notable exception, with imports remaining subdued despite the latest price rally.
