If once is chance, and twice is coincidence, then the world likely woke up on June 13 wondering if six is a pattern—and a disturbing one, at that.

Six in this case refers to the number of times in the last month thatan oil tanker in the waters adjacent to the Middle East has been attacked.

With human civilization now quaffing about 96 million barrels of oil a day, the attacks have seized the attention of some of the world’s most important power brokers—whether they be leaders of sovereign governments, or owners and traders of the world’s most precious energy commodity.

It all started on May 12, when four oil tankers anchored in the Persian Gulf were sabotaged with mines placed upon their outer hulls. The explosives, known as limpet mines, are designed to wreak havoc on water-faring vessels, and are believed to have been deployed by teams of highly trained divers.

While none of those four vessels were sunk, investigations into the attacks have suggested the intent may actually have been to disrupt, instead of to destroy, the ships. As to the rationale behind the attack and the perpetrators, much less is known.

A recently released United Nations report containing investigative findings relating to the May 12 Persian Gulf incidents stated that, “it was likely the work of a government rather than a terrorist or militant group.” However, nothing conclusive about the identities or origins of the attackers has yet been discovered or released.

Oil tanker on fire off the coast of Dubai. REUTERS/Matthias Seifert (UNITED ARAB EMIRATES)

Disturbingly, the ink on that report was barely dry when two additional vessels were targeted on June 13.

In this case, the attacks occurred in the Gulf of Oman, which is connected to the Persian Gulf via the Strait of Hormuz—meaning it was right around the corner from the May attacks. Roughly 30% of the world’s seaborne oil sails through this series of waterways en route to customers scattered throughout the world.

While limpet mines are again believed to have been the devices used to trigger the latest tanker damage, information collected from witnesses on one of the vessels indicated that “flying objects” may also have been involved.

Given the  fifth and sixth attacks occurred recently, it will take some time before a complete investigation can be conducted, compiled, and disseminated.

What’s already known is that all six incidents occurred within one of the most important strategic arteries of the global energy supply chain. And with six attacks strung together in such a short period of time, the crude oil niche of the world economy is undoubtedly on edge.

Pulling up a map of the area, one can see how the Persian Gulf, the Strait of Hormuz and the Gulf of Oman are all wedged between a great number of countries that are well-known for their extensive reserves of crude oil, including Iran, Iraq, Kuwait, Saudi Arabia, Bahrain, Qatar and the United Arab Emirates.

The financial markets, especially the energy sector, tend to get jittery when geopolitical concerns materialize in the Middle East, and these events are no different. Crude oil spiked by about 3% after the fifth and sixth tanker attacks were reported on June 13.

More importantly, the CBOE Crude Oil Volatility Index (OVX), which measures fear in the oil market much like the VIX does in the S&P 500, has surged dramatically in recent weeks. After dropping as low as 27 in May, the OVX closed at nearly 43 on June 14—a 60% spike.

Given the strategic importance of the area in question, heads of state from the affected regions (and beyond) have moved quickly to identify the perpetrators.

However, no clear evidence has yet been found (or at least revealed), and no group has taken public responsibility, meaning any assumptions about the origins and intent of the attacks at this time are purely speculative.  

Circumstantial evidence from the second attack, produced by the United States military, did lay some suspicion at the doorstep of the Iranian government. The evidence took the form of a video showing an Iranian registered boat with military markings idling astride one of the stricken vessels in the Gulf of Oman around the time of June 12 attack.

Complicating matters further is the fact that the Iranian government had threatened to close or disrupt traffic in the Strait of Hormuz as recently as April. Iranian sovereign territory borders the northern shoreline of the Persian Gulf, the Strait of Hormuz and the Gulf of Oman.

At this juncture, Iran has unequivocally denied involvement in any of the six attacks.

The big question now is what happens next. Any future scenario that includes a closure or limitation of crude oil transit through the Strait of Hormuz would almost certainly catalyze a quick uptick in the price of crude oil (due to the associated tightening of supplies in the market.

And the collateral damage from any future attacks could spread far beyond the financial markets, especially with tensions in the Middle East already at a critical level. It was only last month that rumors surfaced that the United States military was considering its options for a full-scale military conflict with Iran.

There’s simply no doubting the fact that recent events have ratcheted up tensions for all stakeholders in the Middle East, including the United States, which maintains the Fifth Fleet in nearby Bahrain.

With the VIX slipping to 15, and the OVX rising to 42, there also appears to be some divergence in the direction of volatility within the financial markets.

When divergences such as this occur, attractive trading opportunities can multiply quickly. A good example might be a volatility pairs trade involving SPY and the oil sector ETF XLE. Alternatively, traders embracing the mean reversion philosophy might view elevated levels of volatility in the OVX as a good chance to get short premium in an oil-related ETF or single stock.

For more context on historical spikes in OVX, a previous installment from tastytrade’s Market Measures series is highly recommended.

Traders seeking to monitor ongoing developments related to the tanker attacks, as well as the broader financial markets, should also find tastytrade’s live programming (watch tastytrade live now) worth following in the coming days and weeks.

Sage Anderson is a pseudonym. The contributor has an extensive background trading equity derivatives and managing volatility-based portfolios as a former prop trading firm employee. The contributor is not an employee of luckbox, tastytrade or any affiliated companies.