Geopolitical Risk Drives Cross Asset Volatility
The Wall Street Journal reported US preparations for potential strikes on Iranian energy targets, citing multiple officials. Donald Trump said Iran “can be taken out in one night”, and a deadline was set for April 7 at 8:00 PM ET, including demands to reopen the Strait of Hormuz. Iran rejected ceasefire proposals backed by Pakistan, Egypt and Turkey for a 45-day pause. In the US, ISM Services PMI eased to 54 from 56.1, below the 55 forecast, while prices paid rose to 70.7, the highest since October 2022. Nonfarm Payrolls showed 178K jobs added versus 60K expected, after February’s -133K, with a 68K average in the first three months. Unemployment fell from 4.4% to 4.3%, and money markets now expect rates to stay steady all year. Technically, resistance is at $4,700 and the 100-day SMA is $4,639. Below that, levels include $4,600, $4,553 and $4,500, while upside levels include the 20-day SMA at $4,755 and $4,800. We are watching the April 7th deadline for Iran very closely, as any military action could cause extreme market swings. This uncertainty has already pushed the CBOE Volatility Index (VIX) up over 35% in the last week, currently sitting near 28. Options premiums are high, suggesting traders are bracing for a major move in either direction. With the Strait of Hormuz under threat, through which nearly 21 million barrels of oil pass daily, crude oil is the most direct play on this conflict. WTI futures breaking above $113 suggests the market is pricing in a serious supply disruption. Looking back at the spike in early 2022 after the invasion of Ukraine, we know prices can move much higher if supply is actually taken offline.Trade Ideas For Oil Gold Dollar And Volatility
Gold is in a tricky spot, caught between its safe-haven appeal and a strengthening U.S. dollar now above the 100 mark on the DXY. While a full-blown conflict could push gold through resistance at $4,700, a surprise de-escalation could see it quickly test the 100-day moving average near $4,639. We see this as an opportunity for strangles, betting on a big move but not the direction. The Federal Reserve’s steady stance, confirmed by last week’s strong jobs report showing a 4.3% unemployment rate, provides a firm floor for the dollar. Money markets are now pricing in zero rate cuts for 2026, which limits gold’s upside unless geopolitical fears completely take over. This makes long dollar positions against other currencies a potentially attractive hedge. Given the situation, we are focusing on derivatives that profit from rising volatility, such as long positions in VIX futures or buying call options on major energy stocks. Bullish oil spreads could also offer a defined-risk way to play for higher crude prices. For gold, purchasing out-of-the-money puts could be a cheap way to hedge against a sudden peace deal that would send bullion lower. Create your live VT Markets account and start trading now.
Start trading now – Click here to create your real VT Markets account
