Thursday handed traders two oil markets in one session. Brent surged to a session high of $108.23 after Yahya Rahim Safavi, an adviser to Iran’s Supreme Leader, warned that the conflict could expand to the Indian Ocean and beyond if the Islamic Republic faces further attack. Then, mid-session, the floor fell out from under the spike. Reuters reported that a senior Iranian official said the most realistic path forward is for Tehran to allow navigation in the Strait of Hormuz in exchange for the U.S. ending its blockade. Brent closed at $106.60, up 3.4%, while WTI settled at $94.61, up 2.7%.
The intraday reversal from $108 to $106.60 is the whole trade in miniature. Oil is not a one-direction bet right now. It is a market with two credible outcomes, and positioning needs to reflect both.
What the Hormuz Picture Actually Looks Like
The context matters. The U.S. and Iran agreed to a Hormuz reopening framework under a June 17 memorandum of understanding, but the deal quickly collapsed into renewed fighting. It is unclear what is different about the current negotiations. Meanwhile, preliminary ship-tracking data has shown commodity vessel transits through Hormuz fell as low as three ships on Wednesday, well below the 10-day average of about 17, and Saudi Arabia’s workaround for the Strait of Hormuz now carries war-risk insurance costs nearly as high as sending tankers through the strait.
JPMorgan estimated last week that total Middle East oil flows averaged about 17.1 million barrels per day over the past 10 days, still well below the 2025 average. That number, often cited as evidence of normalization, actually confirms how much supply is still missing. A phased Hormuz deal closes that gap and compresses Brent. An Indian Ocean escalation widens it further.
The Refiner Trade: Built for Either Outcome
The cleanest way to hold energy exposure across both scenarios is through domestic refiners rather than integrated majors or crude futures directly. Several research notes this month have argued that crude above $100 per barrel can widen crack spreads, creating an opportunity in Phillips 66, Valero, and Marathon Petroleum. The numbers from last quarter confirm it. Marathon Petroleum posted a refining and marketing margin of $36.33 per barrel versus $17.58 a year earlier, while Valero reported a blended refining margin of $23.62 per barrel and a $43.52 per barrel ULS diesel margin on the Gulf Coast.
If the Hormuz deal holds and Brent pulls back toward the low $90s, domestic refiners benefit from cheaper feedstock while maintaining elevated product prices until global supply fully normalizes. Seven U.S. refinery closures since 2019 set a structural margin floor that does not disappear with a ceasefire. If the deal collapses and Iran pushes toward the Indian Ocean, crude stays elevated and refining margins expand further. Both roads point the same direction for VLO, MPC, and PSX.
Phillips 66 closed recently at $272.99, up about 116% year-to-date. Marathon Petroleum and Valero have traded in the high-$300s to around $400 range at points this month. Goldman Sachs raised its Valero price target to $457 on September 23, reflecting the durability of current margin conditions. Institutional investors own a large majority of Valero’s shares, which is consistent with broad institutional ownership rather than a purely retail-driven move.
What to Avoid: Airlines
The flip side of the refiner trade is the airline short, or at minimum a sharp reduction in airline exposure. United Airlines said it expects nearly a $6 billion increase in anticipated fuel costs for full-year 2026 versus what it expected at the start of the year, and said second-quarter fuel expense was up $2.3 billion, or 84% year-over-year. Separately, analysts have marked up Delta’s 2026 fuel expense projection to about $11.17 billion, up 10.8% from estimates made before the conflict began. Neither carrier can fully pass that cost to passengers indefinitely. A phased Hormuz reopening could relieve some pressure, but crude’s rise this year has already done damage that does not unwind in a single session.
Levels and Risk Plan
For Brent, the key range is $103 to $110. A confirmed close above $108 on fresh Indian Ocean escalation puts the XLE and refiner complex back in momentum mode. A break below $103 on credible Hormuz progress compresses upstream exposure fast, though refiners should hold. On XLE, the 52-week high is $66.17 and the 52-week low is $42.35; with the fund trading near $62, the technical positioning reflects elevated geopolitical risk, not peak optimism. The primary risk to both the long-refiner and the avoid-airline thesis is a rapid, comprehensive Hormuz agreement that restores full vessel traffic. That is exactly the scenario the market has now priced as unlikely twice over.
