A senior official from Iran recently stated that vessels adhering to the updated protocols for the Strait of Hormuz will receive priority access. Currently, the market anticipates traffic at fewer than ten ships traversing the Strait from April 13 to April 19, which translates to a mere 0.4% confidence level in that estimate.
Iran's new strategy to prioritize compliant vessels and enforce fee payments could potentially deter some ships from navigating through the Strait. This shift challenges the market's previous assumption that traffic would consistently remain above ten vessels. In fact, the volume for 80 ships expected to transit by April 30 has drastically decreased to 22.5%, dropping from yesterday's estimate of 51%.
The decision by Iran signals an intention for sustained restrictions on traffic. Despite no notable changes in volume over the past 24 hours, the market is pricing in a minimal chance that traffic will return to normal levels by the end of May. The introduction of these new protocols adds complexity and increases the friction, making high-volume transits less likely.
Traders should be aware that the market's current low volume of USDC makes it particularly vulnerable to small transactions. For instance, a mere $12 can shift the odds for April 19 by 5 percentage points, indicating high volatility and sensitivity in price changes caused by individual traders. In contrast, altering the odds for April 30 requires a significantly higher amount—$797—which implies that traders hold a more definitive perspective on the longer-term outlook.
Investors betting on fewer than ten ships transiting by April 19 at 0.4¢ per YES share stand to gain a 250x return if Iran’s strategy tightens domestic traffic significantly. However, acknowledging the existing geopolitical climate, including the US naval blockade, such an outcome seems improbable.
It is prudent to monitor CENTCOM’s actions in response to Iran's new vessel protocols as well as any updates from the US or other regional players that could influence transit conditions. Important statements from figures like Admiral Brad Cooper might indicate shifts in enforcement or adjustments to the blockade strategy.