Equity markets steadied after an initial fall at the open, despite the continued closure of the Straits of Hormuz. Markets reacted as the US and Iran were reported to be close to starting talks again.
Oil prices rose and the Vix increased, pointing to ongoing concern about the medium-term outlook. Even so, share prices recovered from the early drop.
In the UK, unemployment is expected to rise on Tuesday, with inflation data due on Wednesday. These releases add to the Bank of England’s task as it weighs interest rates against higher prices and weaker conditions.
Political uncertainty at Westminster, linked to Peter Mandelson, adds another source of pressure. This may complicate decisions at the Bank of England.
Looking back at the market’s remarkable calm during the Hormuz closure in 2025, we see a familiar pattern emerging today. With the VIX currently suppressed near 14, a level reminiscent of the complacency before past sell-offs, the market seems to be underpricing risk again. This suggests that buying cheap, out-of-the-money put options on major indices could be a cost-effective hedge against any sudden geopolitical or economic surprises.
We recall how the dip was bought aggressively in 2025 despite the spike in oil, a lesson we must not forget. While the major equity indices are calm, recent reports show crude oil inventories have seen unexpected draws, with the latest EIA data showing a 2.5 million barrel decline when a build was expected. Given this underlying tightness, traders should consider using call options on oil futures to position for a sharp move higher should any supply chain headline re-emerge.
The UK’s economic dilemma from 2025, balancing inflation and a weak economy, continues to present opportunities. With the latest UK inflation data for March 2026 coming in at a stubborn 3.2% and GDP growth stagnating, the Bank of England’s next move is highly uncertain. This makes option straddles on the GBP/USD currency pair an interesting strategy to capture volatility, regardless of whether the central bank finally pivots or holds firm.
