Iranian state media IRIB reported that a spokesperson for Iran’s Khatam al-Anbiya Central Headquarters said on Monday, during European trading hours, that Tehran condemns US plans to blockade vessels entering and leaving Iranian ports.
Earlier on Monday, US President Donald Trump posted on Truth Social that the United States will blockade ships entering or exiting Iranian ports on April 13 at 10:00 A.M. ET (14:00 GMT).
Iran Responds To US Blockade Plans
The spokesperson said there would be no security for ports in the Persian Gulf if Iran’s own security is threatened. The spokesperson also described US restrictions on vessel movements as illegal and as piracy.
The spokesperson added that vessels linked to Iran’s enemies would not be allowed to pass through the Strait of Hormuz.
With the US set to blockade Iranian ports and Tehran threatening the Strait of Hormuz, we are bracing for major energy market volatility. Roughly one-fifth of the world’s daily oil consumption passes through this chokepoint, making any disruption a significant supply shock. We believe this makes long positions in WTI and Brent crude futures for the front months an immediate priority.
We saw a similar playbook back in 2019 when attacks on Saudi Arabian oil facilities caused the largest single-day jump in oil prices in decades. Brent crude futures surged almost 20% in a single session, showing how quickly the market prices in supply risk. This historical precedent supports a strategy of buying call options on major oil ETFs to capture potential upside.
Volatility Gold And Equity Hedges
The threat of a direct US-Iran confrontation will almost certainly send a wave of fear through the broader market. The CBOE Volatility Index (VIX), which has been hovering in the mid-teens, is poised for a significant spike above the 25 or even 30 level. We are therefore looking at buying VIX call options or VIX futures to hedge against a market-wide selloff.
In times of significant geopolitical stress, capital invariably flows into safe-haven assets, and we expect this time to be no different. Looking back at early 2022, gold prices rallied over 10% in the weeks following the start of the conflict in Ukraine, pushing near record highs. Consequently, we see value in adding exposure through gold futures or call options on gold-backed ETFs.
Higher energy prices and the risk of a wider conflict create a powerful headwind for global equity markets. The combination of inflation pressure from oil and general risk-off sentiment will likely weigh on indices like the S&P 500. We view buying put options on the SPY or SPX as a prudent hedge against a potential market correction in the coming weeks.
