Rabobank’s Michael Every described rising energy and geopolitical strain in Europe, including disrupted oil flows via the Druzhba pipeline. Ukraine’s President Zelenskyy said Druzhba will be ready to ship Russian oil again after Russia halted Kazakhstan’s oil flows to Germany through the route.
An EU loan of €90bn for Ukraine is expected to go ahead. The funds are expected to be used mainly for US Patriot systems, UK Storm Shadow missiles, and Ukraine-made drones.
Energy And Geopolitical Crosscurrents
Separate developments include talk of attacks on Russian oil refineries using drones. Ukraine has also reportedly proposed naming part of the disputed Donbas region “Donnyland”.
In energy markets, war affecting Middle East and Russian supply has raised concerns about fertiliser availability and a potential global food shock. The EU is considering restarting joint gas purchasing.
Air travel faces fuel constraints, with Brussels stating that “fears of widespread cancellations are overblown”. Lufthansa removed 20,000 flights it called unprofitable to conserve jet fuel, and EU lawmakers urged stopping the European Parliament’s monthly trip to Strasbourg due to energy costs.
Looking back at the analysis from 2025, the concerns over European energy security and geopolitical fallout from Ukraine are becoming reality again. We are now seeing European natural gas futures, specifically the Dutch TTF benchmark, surge over 30% in the last month alone as storage worries resurface. This trend suggests the underlying weaknesses identified last year were never fully resolved.
This environment creates a difficult situation for the Euro, caught between high energy costs slowing the economy and persistent inflation. The latest Eurozone HICP inflation data for March 2026 came in at a stubborn 3.1%, well above the 2% target and dashing hopes for imminent rate cuts from the ECB. This stagflationary pressure makes directional bets on the Euro risky, but points towards higher market volatility.
Trading Implications For Euro Volatility
For derivative traders, this is a signal to consider buying volatility on Euro-related assets. Long positions on VSTOXX futures, which track Euro Stoxx 50 volatility, could prove profitable as uncertainty around ECB policy and growth continues. Similarly, buying straddles on EUR/USD would benefit from a large price move in either direction without needing to predict the outcome.
The specific threat to Russian oil refineries that we saw escalating in 2025 continues to impact the market for refined products. Satellite imagery from last week confirms further damage to energy infrastructure, tightening the supply of diesel in Europe. This has pushed the diesel crack spread, the profit margin for refining a barrel of crude into diesel, to an 18-month high.
Given this backdrop, traders should look at options that protect against a sharp downside move for the Euro if these pressures intensify. Buying out-of-the-money EUR/USD put options for the coming months offers a low-cost way to hedge portfolios or speculate on a negative shock. The persistent risks to the Euro-area’s macroeconomic health make such defensive positions prudent.
