Oil Giants Bypass Strait of Hormuz as Iran War Threatens 20% of Global Supply
Chevron is set to sign an Iraqi oil deal and build a pipeline that avoids the Strait of Hormuz, while traders pile into "TACO" options to hedge against wild price swings as U.S.-Iran strikes escalate.
The closure of the Strait of Hormuz—through which about 20% of the world’s oil passes—has pushed global energy companies and Gulf states to accelerate plans that bypass the strategic waterway [197525][197741]. Chevron Corp. expects to sign agreements with Iraq on Friday to invest in major oil fields, including plans for a pipeline that would circumvent the narrow passage [197741].
The moves come as the United States intensifies military strikes against Iran, hitting targets near Tehran and retaliating against Gulf allies [197401]. Iran has warned that any attack on its infrastructure crosses a "red line" and promised retaliation if U.S. President Donald Trump follows through on threats to target Iranian infrastructure [197562]. Six consecutive days of back-and-forth attacks now threaten to escalate into an all-out war [197401].
Oil prices have surged on the supply disruption fears [197725]. Traders are turning to an unusual hedge nicknamed "TACO"—short for Tail-Asset Correlation Options—to protect against sudden reversals in Trump’s stance on Iran that could cause rapid price swings [197738]. The cheap options have become a favored tool as geopolitical tensions spike [197738].
The crisis is rippling through global markets. Major Gulf stock exchanges closed lower, and borrowing costs on U.S., European, and Asian government bonds edged higher as investors priced in inflation fears from higher energy costs [197717][195131]. The United Nations Secretary-General expressed "deep concern" over the military escalation and stressed that all parties must respect free navigation under international law [196685].