Bets on normal Hormuz traffic by December climb before Gulf talks

Traders place the hope in the final two months, with September and October contracts priced low.

In one line: The summit-driven jump to 25% overprices a normal Hormuz by December. Expect a drift back toward 18% unless October odds break 15% by 15 October.

President Donald Trump is set to meet with Gulf Arab leaders as regional heads gather in New York for the UN General Assembly, the Boston Herald and a string of other papers reported on 22 Sep.

The December 31 contract trades at 25% YES. That is up 5.0 points on the day and up from 18% on 16 Sep. The path was rough, with a low of 17% on 20 Sep and a high of 27% on 22 Sep as the summit reports landed, then a slip back. The sister contracts show where the hope sits. September 30 is at 1% and October 31 at 8%, so traders place most of the chance of normal traffic in November and December.

The jump lines up with the summit news, and that is the weak link. A meeting between leaders is talk, while the contract asks whether ships move through the strait as they did before. Traders bid the headline to 27% and then gave some back, which reads as a market unsure what the meeting will deliver. The October price is the tell. If traders expected the talks to change traffic soon, October 31 would sit well above 8%, and the gap between the two contracts says the market sees a slow path at best.

My call is that 25% overprices December normalization on the strength of one summit headline, and the contract drifts back toward its 18% starting point. I am wrong if the October 31 contract trades above 15% on or before 15 October, which would mean traders see traffic returning well before December.

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