Geopolitical Risk And Oil Price Support
CBA economists reported that Iran may respond to gain leverage in future talks to end the war. They also said the US and Israel may seek to reduce Iran’s offensive capacity to gain leverage in future talks. The Telegraph reported that US President Donald Trump called the rise in oil prices a “very small price to pay” for defeating Iran and ensuring global peace. It also reported that Trump wrote on Truth Social that Iran’s only option is unconditional surrender, after which he would help select its next leader. Gains in USD/CHF may be limited if the Swiss Franc strengthens on safe-haven demand. Traders are also watching for Swiss National Bank intervention, as SNB Vice-President Antoine Martin repeated that the bank is ready to act against excessive Franc strength, while Swiss inflation remains weak. Last year, we saw USD/CHF rally past 0.7800 driven by conflict fears in the Middle East and a spike in oil prices. That situation was a clear signal for long US Dollar positions against the Franc. Today, the environment is different, with West Texas Intermediate crude having stabilized around $82 per barrel after a production increase from non-OPEC members late last year.Shifting SnB Policy And Trade Implications
A key shift is the Swiss National Bank’s focus, which is no longer on capping Franc appreciation but on fighting persistent inflation, which clocked in at 2.1% for February 2026. This contrasts with last year’s environment where the US Dollar Index was near 99.50; today it trades closer to 95.20. Consequently, the SNB is far less likely to intervene against Franc strength, removing a major headwind for the CHF. For the coming weeks, buying call options on USD/CHF seems misplaced given the changed fundamentals. Instead, traders could consider purchasing put options to speculate on a further decline towards the 0.7650 level seen earlier this year. This strategy benefits from a stronger Franc driven by the SNB’s hawkish stance and calmer energy markets. However, we must remember how quickly volatility surged after the events in Ukraine back in 2022, reminding us that geopolitical calm is fragile. Implied volatility on USD/CHF options is now at a multi-month low, making long-dated straddles relatively cheap. This could be a prudent way to position for a potential, unexpected spike in market tension without betting on a specific direction. Create your live VT Markets account and start trading now.
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