Citrini Research sent an analyst to the Strait of Hormuz. Here's what they found.

Vessel traffic through the Strait of Hormuz has collapsed from over 100/day pre-war to roughly 15–18 ships on observed dates (~80–85% decline), driving higher energy prices and raising inflation/recession fears. Citrini Research's on-the-water reporting indicates Iran is managing passage like a 'toll road' rather than a full blockade, implying traffic may recover under Iranian control even as the conflict risks escalation. Portfolio impact: elevated oil/gas price volatility and supply-risk premia for energy and transport-related assets; geopolitical risk should push a risk-off stance and higher energy hedging demand.

Analysis

Markets are likely overstating a binary outcome at a critical maritime chokepoint and understating a persistent elevated-cost outcome. If traffic remains open but subject to non-market levies and elevated war-risk premia, expect a structural increase in seaborne transportation costs equivalent to roughly $0.5–$2.0/barrel delivered and a 30–150% lift in spot tanker dayrates versus pre-crisis baselines over the next 1–3 months. That uplift benefits asset owners with flexible vessel types (VLCCs for crude, MR/Handy for product storage) and penalizes downstream refiners that cannot quickly pass through higher freight and bunker costs.

Second-order effects will ricochet through supply chains: longer voyage times (5–20% longer) raise bunker burn and reduce effective capacity, tightening available tonnage and increasing the marginal value of floating storage. Credit-sensitive, capital-intensive shippers with older fleets will see refinancing stress; insurers and reinsurers writing war-risk cover can re-rate pricing and improve short-term underwriting margins, while trade flows may shift to alternative pipelines and shorter-haul suppliers, compressing regional product arbitrage windows.

Tail risks are asymmetric. A rapid kinetic closure of the passage would trigger a disorderly spike in energy prices and shipping chaos (days-to-weeks), while diplomatic accommodation or a securitized escort program could normalize freight premia in 2–8 weeks and compress oil spreads. The highest-probability path is a drawn-out, higher-cost equilibrium—tradeable and hedgeable—rather than a clean shut or free passage, creating an environment where volatility sells for premium capture but leaves open large jump risk events.

Key Decisions for Investors

• Long modern crude tanker equities (DHT, EURN) — 3–6 month horizon. Position: buy DHT shares or 3–6 month call spreads (buy calls, sell higher strikes) sized for 3–6% portfolio exposure. R/R: capture elevated charter rates and optionality to floating storage upside; downside: freight normalizes -> share price could fall 20–40; capped-loss via call spreads controls premium.
• Brent vs WTI relative play — 1–3 month horizon. Position: long ICE Brent futures or BNO and short equivalent WTI exposure (USO) sized to capture a 3–7% Brent premium widening. R/R: benefits sustained seaborne tightness and regional bottlenecks; risk: global oil demand shock or rapid diplomatic relief compresses the spread — hedge with short-dated call protection.
• Pair trade: long war-risk/reinsurance exposure, short refinery margin-sensitive names (RNR/ACGL long; VLO short) — 3–9 month horizon. Position: modest long in reinsurer equities or 9–12 month call options funded by short refiners. R/R: higher war-risk premiums lift reinsurance earnings while refiners' margins face pressure from freight and bunkers; downside: large oil rally benefits refiners' integrated crude valuations — keep position size limited.
• Low-cost hedge: buy 4–8 week Brent 3–6% OTM put spreads (debit-limited) sized to cover energy exposure or downside from a tactical de-escalation. R/R: limited premium buys protection if markets price normalization quickly; cost-effective compared with outright futures shorts.