Oil Markets: Traders Managing Volatility Amid 'Fog of War' Disruption

Introduction: After the US and Israeli strikes on Iran on February 28, 2026, commodity traders say they are operating in a “fog of war” as oil and other energy markets experience some of the most violent intraday reversals in recent memory.

Details: In the opening days of the crisis Brent and WTI posted rapid intraday spikes and retracements — at times testing the $100/bbl area before reversing toward the $80–90 range. The International Energy Agency (IEA) described the situation as the largest supply disruption in oil-market history and coordinated a record international release of emergency stocks (c.400 million barrels), while a number of countries moved to tap national reserves. Traders caution that the relief is temporary and that delivery and insurance risks remain elevated.

Market impact: Shipping through the Strait of Hormuz has been severely disrupted, prompting production curbs and localized refinery shutdowns across the Gulf. The result has been wider differentials, higher war-risk insurance premia and increased short-term funding costs for market participants. Spot–futures dislocations widened and arbitrage channels narrowed as physical flows were re‑routed.

Context and background: The Strait of Hormuz typically carries roughly 20% of seaborne oil; an effective closure or sustained threat to transit quickly translates into multi-million-barrel-per-day supply losses. While strategic petroleum reserve releases can blunt immediate price spikes, agencies and analysts warn these are stopgap measures that cannot substitute for restored production and secure shipping lanes — with clear implications for global inflation and growth.

Looking ahead: Market participants expect price direction to remain news-driven: a swift de‑escalation and reopening of shipping could see volatility recede, whereas continued attacks and production outages would support elevated price paths — several banks have raised near-term Brent forecasts above $100 if disruption persists. Traders say risk-management will favor tighter position sizing, increased use of options for hedging and heightened focus on counterparty liquidity. Newsflow on military developments and convoy/security arrangements for tankers will be watched closely.