US President Donald Trump said in a Truth Social post on Wednesday that, if Iran complies with what has been agreed, “Epic Fury” would end and the blockade would allow the Strait of Hormuz to be open to all, including Iran.
He added that if Iran does not agree, bombing would begin again, and would be at a higher level and intensity than before.
Markets And Dollar Reaction
Markets stayed risk-positive after the comments. At the time of press, the US Dollar Index was down 0.7% on the day at 97.80.
The market is currently betting on peace, but we see this as a classic binary event with wildly different outcomes. The current risk-on mood, reflected in the weaker dollar, is pricing in a successful deal with Iran. This presents a clear opportunity for traders who believe the assumption of a deal is too optimistic.
Our focus should be on crude oil options, as the Strait of Hormuz is the world’s most critical chokepoint. With about 21% of global petroleum consumption passing through it, any disruption is significant. We saw West Texas Intermediate (WTI) futures jump nearly 15% in a single day back in 2019 after attacks on Saudi facilities, and a full-blown conflict now could easily send WTI from its current price of around $85 per barrel well into the triple digits.
This situation makes cheap, out-of-the-money options on the CBOE Volatility Index (VIX) very attractive. While the VIX is calm today, sitting around 14, we remember how quickly it spiked above 30 during the banking jitters in 2025. A failure in these talks and subsequent military action would inject massive fear and uncertainty into the market, making VIX call options a powerful hedge against a risk-off implosion.
Dollar Reversal Risk
The US dollar itself provides another clear signal for a potential trade. Its current weakness at 97.80 is a direct result of the positive deal expectations. Should talks collapse, we would expect a rapid flight to safety, pushing the dollar index back over 100 as global capital seeks a haven, a pattern we have seen repeatedly during past geopolitical crises.
For those with a strong conviction that the deal will fail, we should also look at call options on major defense contractors like RTX and LMT. An escalation would immediately translate into increased military spending and replenishment of munitions. Looking at their performance during the start of previous conflicts shows a clear historical precedent for a sharp rally in these names.
