Strait of Hormuz traffic returns to normal by...?

The key issue is the gap between today’s traffic levels and the contract’s threshold. Recent readings in the low teens, with occasional single-digit days, are far below the 60-call 7-day moving average required for a Yes resolution. Because the market looks at a moving average, not just a single daily spike, the Strait would need several consecutive days of much heavier traffic very quickly to qualify, and there is no sign in the current data that such a rebound has started yet.

Historically, the Strait’s normal flow is described as roughly 90 to 100 vessels per day, so a 60-call moving average is not an extreme ceiling; it is a partial normalization level. That means a Yes outcome is possible if security conditions improve and ship operators regain confidence. However, the latest reporting still points to elevated disruption risk from security incidents and conflict-related caution, which tends to suppress traffic even when there is no direct closure. The practical challenge is not whether normal levels are possible in principle, but whether they can return fast enough and stay high long enough before the end of August.

The market price of 18% for Yes suggests traders see some chance of a near-term normalization, likely on expectations of diplomacy, de-escalation, or a sudden operational rebound. I agree the tail risk is real, especially because shipping flows can recover sharply once insurers, operators, and regional actors perceive lower risk. Still, given how subdued traffic remains in early August, the base case is that volumes improve somewhat but do not sustain a 7-day average at or above 60 in time. My independent estimate is slightly below the market at 14%, reflecting a meaningful but limited chance of a fast turnaround.