The Hormuz risk premium is now a number in the oil price, and the number is small

On January 29, 2026 Brent crude settled at $70.71 a barrel, up $2.31 or 3.4%, its highest close since July, with West Texas Intermediate at $65.42. The stated cause was the possibility that the United States would attack Iran. That is a three-session rally driven by rhetoric rather than by barrels: nothing about Iranian production changed that day, and roughly 20 million barrels a day continue to move through the Strait of Hormuz.

1. 1.Brent settlement, January 29: $70.71 a barrel, up $2.31 on the day.
2. 2.West Texas Intermediate settlement: $65.42, up $2.21.
3. 3.Oil transiting the Strait of Hormuz: about 20 million barrels a day, roughly a fifth of world supply.
4. 4.Iranian production: around 3.2 to 3.3 million barrels a day, about 3% of global supply.
5. 5.Citigroup's estimate of the escalation premium: $3 to $4 a barrel.
6. 6.Citi's three-month Brent target on further escalation: as high as $72 a barrel.

What is actually new

Three things moved in the same week. President Trump deployed the Abraham Lincoln carrier strike group to the region and warned on social media that Iran would face something worse than last year's strikes unless it negotiated on its nuclear programme. Reuters reported that he was weighing targeted strikes on Iranian security forces and leaders. And the Associated Press reported, citing two Pakistani security officials and the EOS Risk Group, that Iran had warned ships at sea that it planned a drill the following week involving live firing in Hormuz. A naval exercise with live ordnance in a two-mile-wide strait is a different proposition from a rhetorical exercise.

The options market read the same way. Bullish call additions grew at the fastest rate in at least six years, and bullish calls traded above bearish puts for the longest stretch in roughly fourteen months. Meanwhile the EU sanctioned Iran over the crackdown on protests, a second source of pressure that most daily price commentary did not weight heavily. A weaker dollar and signals of steady rates from the Federal Reserve contributed to the rise as well, which is a useful reminder that not every dollar of a geopolitical rally is geopolitical.