Oil Shock And Strait Risk
Donald Trump said the US navy will offer insurance to ships in the Gulf after Iran largely shut the Strait of Hormuz, and may escort vessels if needed. Iran’s Revolutionary Guards said they still control the Strait. The USD Index eased to about 99.00 in the European morning after rising nearly 1.5% over two days. US stock index futures fell 0.3% to 0.4% after Wall Street ended sharply lower on Tuesday. USD/JPY slipped below 157.50 after two days of gains. Japan’s finance minister said officials were watching markets and could act, while the BoJ governor warned higher oil prices could hurt Japan’s trade and growth. Gold fell more than 4% on Tuesday, then rebounded to about $5,170, up over 1% on the day. EUR/USD hit below 1.1550 on Tuesday, then moved back above 1.1600 on Wednesday.Macro Moves And Option Hedges
Australia’s annualised Q4 GDP was 2.6% versus 2.1% prior and 2.2% expected. AUD/USD held above 0.7000, and GBP/USD steadied near 1.3350. Looking back to this time in 2025, the sharp spike in crude oil toward $76.50 was a clear signal to anticipate further price shocks. With the Strait of Hormuz, a chokepoint for roughly 20% of global oil transit, being contested, buying call options on WTI or Brent futures was the primary move to capture upside. This is a familiar pattern, as we’ve seen similar, though less intense, supply fears cause WTI prices to hover in the low $80s through late 2025 and into early 2026. The US Dollar’s surge to 99 on its index was a classic flight-to-safety that pressured other major currencies. This environment suggested buying put options on pairs like EUR/USD and GBP/USD to hedge against continued dollar strength. The situation with the Japanese Yen was especially tense, and with USD/JPY above 157, buying yen call options was a reasonable bet on eventual government intervention, a tactic we saw them deploy back in 2022. The dip in US stock futures at that time in 2025 pointed directly toward market fear and a risk-off mood. This made buying put options on the S&P 500 a logical defensive strategy against a potential downturn. Simultaneously, purchasing call options on the VIX would have been an effective way to profit from the expected rise in market volatility. Gold’s behavior in 2025 was particularly instructive, as its initial drop showed how an overwhelmingly strong dollar can temporarily overshadow safe-haven demand. That rapid rebound to near $5,170, however, created an ideal setup for volatility strategies like straddles, which profit from large price swings in either direction. It was a clear signal that any sign of the dollar rally pausing would send gold prices significantly higher. Create your live VT Markets account and start trading now.
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