MUFG reported that rising US–Iran tensions, including threats linked to the Strait of Hormuz, have increased uncertainty around any move towards peace. The bank’s commentary linked this to ongoing risks to oil supply.
It said Asian currencies and regional risk assets may face pressure while conflict risks remain. It also noted limited improvement in Strait of Hormuz tanker flows and the possibility of Iraqi exports moving through the strait.
Supply Risks And Market Timing
MUFG added that even if the Strait of Hormuz reopened fully, supply would take time to reach markets. It cited an estimated timeline of 3–6 months, with petrochemicals described as the most affected.
The commentary listed three constraints that could contribute to an eventual end to the war: munitions, markets, and the mid-terms. It also referred to uncertainty over how much oil prices could rise from current levels.
The wide gap in expectations between the warring parties means a path to peace remains narrow and unlikely. Continuing threats over the Strait of Hormuz, which handles about a fifth of the world’s oil supply, will keep energy markets on edge. We therefore remain cautious on Asian currencies and regional risk assets in the coming weeks.
With Brent crude currently hovering around $105 a barrel, any further escalation could trigger a significant price spike. Looking back at late 2025, we saw how initial threats to the strait caused a 10% jump in oil prices in under two weeks. Traders should consider buying call options on oil futures to gain from potential upside while capping their risk.
Hedging Regional Currency And Equity Exposure
This sustained pressure on energy prices directly hurts major oil-importing nations in Asia, such as South Korea and India. The Korean Won has already weakened by over 4% against the dollar this quarter, reflecting this economic strain. We believe purchasing put options on the Won or the Indian Rupee offers a solid hedge against further currency depreciation.
The dual threat of high energy costs and geopolitical risk is also weighing on regional stock markets. Even if a resolution were found today, it would take months for oil and petrochemical supply chains to normalize, delaying any real recovery. This makes buying put options on indices like the KOSPI 200 a prudent strategy to insure against a market downturn.
Overall uncertainty translates into higher implied volatility, which can be traded directly. Given the binary nature of the conflict, with news able to swing markets sharply, derivative plays that benefit from large price moves are attractive. Strategies like long straddles on major energy ETFs could prove profitable, capturing value from a significant move in either direction.
