US President Donald Trump said China’s leader Xi Jinping likely has power to influence Iran, Reuters reported on Friday. He also said he would not be much more patient on Iran.
On Thursday, Trump said Xi had offered to help negotiate an end to the war with Iran and keep the Strait of Hormuz open to global shipping. He added that China wants to buy oil from the US.
Trump said he would start sending Chinese ships to Texas, Louisiana, and Alaska. He also said China would open its country in stages.
He said a visa company issue was being raised in talks with China. He added that Iran’s enriched uranium can be entombed, but he would rather get it.
Trump said getting Iran’s enriched uranium was more for public relations than anything else. He also said the Iranian leaders he is dealing with are reasonable.
Looking back at these comments from 2019, we are reminded of how central the US-Iran-China relationship is to market stability. The themes of sanctions and influence over the Strait of Hormuz are re-emerging today, making this old intelligence newly relevant. Traders should therefore anticipate a period of heightened geopolitical risk centered on Middle East energy supplies.
The oil market is already reflecting this renewed tension. Brent crude futures for July have been trading in a tight but elevated range, hovering just above $95 per barrel through late April and early May 2026. More importantly, the CBOE Crude Oil Volatility Index (OVX) has spiked to over 40, a level we have not seen since the supply chain scares of late 2025, indicating that the options market is pricing in a significant move.
This nervousness is justified when we look at the potential supply disruption from Iran. Their production, which had been a steady 3.4 million barrels per day through most of last year, dipped to 3.2 million in the first quarter of 2026 amid renewed US diplomatic pressure. Any further escalation could easily remove more barrels from an already tight global market.
The China dynamic mentioned in the historical text remains a key variable. China’s oil imports from Iran have remained robust, averaging 1.1 million barrels per day through the end of 2025, providing Tehran with a critical economic lifeline. This complicates any US strategy and suggests that tensions are unlikely to be resolved quickly, locking in a high-volatility environment for the foreseeable future.
Given this backdrop, we should be positioning for price swings rather than a specific direction. Buying long-dated call options on WTI or Brent futures offers a cost-effective way to hedge against a sudden supply shock that could send prices above $110. The elevated premiums also make selling cash-secured puts on dips an attractive strategy for those willing to take on the risk.
This instability will likely bleed into other asset classes. We should anticipate weakness in transportation and industrial stocks if energy prices remain this high, as seen during the energy price shock in 2025 which shaved nearly 4% off the Dow Jones Transportation Average. Consequently, short positions on airline and shipping company equities could serve as a valuable hedge against our long-energy derivative bets.
