Strait of Hormuz traffic returns to normal by December 31?

Market prices (Yes 0.83) and the substantial event volume indicate strong market confidence that traffic through the Strait of Hormuz will reach a 7-day moving average of 60 or more at least once before the end of 2026, but publicly available real-time IMF Portwatch counts are not provided here so this assessment must synthesize structural factors rather than live daily counts. The contract's winning condition is relatively easy to satisfy because it requires the 7-day moving average to equal or exceed 60 on any single date in the window, not a sustained long-term recovery; that materially increases the probability compared to a requirement for a sustained or median-level recovery. The market-implied probability is a useful reference but may reflect traders' appetite for asymmetric payoffs and risk tolerance as much as hard fundamentals, so I incorporate structural shipping patterns, geopolitical drivers, insurance and operational behavior, and the long remaining calendar window in forming my independent view.

Historically, the Strait of Hormuz has been subject to episodic security shocks that temporarily depress transits, but those shocks often reverse within weeks to a few months once tensions subside or convoy/escort and insurance solutions are implemented; shipping demand, particularly for hydrocarbons and bulk commodities, tends to rebound when risk premiums fall. The key geopolitical risks that most strongly push down transit counts are sustained state-level confrontation, a campaign of repeated successful attacks on commercial shipping, and major sanctions or insurance market dislocations that make passage uneconomic; absent such sustained escalation, commercial incentives and the lack of viable nearby shortcuts mean many voyages continue to rely on the strait. Conversely, the presence of naval escorts, coordinated security measures, improved insurance capacities, and alternative logistics arrangements (e.g., larger shipments or different routes for particular cargo types) can quickly restore transits to near-normal levels once immediate threats are contained.

From a probabilistic standpoint the remaining window to December 31, 2026 is long enough that even a market that is currently below the 60 threshold has many independent opportunities for a 7-day average spike above 60, especially because a single week of intensified traffic (for seasonal, commercial or de-risking reasons) will qualify. I view persistent but manageable tail risks — including a new phase of intense hostilities or a structural rerouting of certain ship classes due to permanently higher insurance costs — as decreasing but non-negligible, so I set the probability somewhat below the market-implied 83% to reflect those outcomes while recognizing the high likelihood a qualifying week will occur within the remaining timeline.