WTI fell more than 10% on Wednesday after a temporary ceasefire agreement between the United States and Iran reduced price support linked to conflict risk. WTI traded near $89.50 per barrel after hitting an intraday low near $86, its lowest level since 25 March.

US President Donald Trump said the US would suspend attacks on Iran for two weeks if Tehran ensures the full reopening of the Strait of Hormuz. Iran indicated safe transit through the route could be maintained during this period.

Market Reaction And Geopolitical Risk

Prices later stabilised, with reports of airstrikes between Israel and Lebanon and warnings from Iranian officials that Iran could withdraw from the ceasefire if attacks continue. The Financial Times also reported an attack on Saudi Arabia’s East-West pipeline, which moves crude from the Gulf to the Red Sea for export.

Attention is on the ceasefire’s durability, the Strait of Hormuz, and US-Iran talks due later this week. In US data, the EIA reported crude inventories rose by 3.081 million barrels, versus 5.451 million the prior week and above expectations for a 0.7 million build.

WTI is a US crude benchmark traded via the Cushing hub and is classed as light and sweet. Its price is driven by supply and demand, political disruption, OPEC decisions, the US Dollar, and weekly inventory data from API and EIA.

The sharp 10% drop in WTI prices is a direct result of the temporary US-Iran ceasefire, which removed the immediate war premium from the market. We see this as a classic “sell the news” event, but the underlying tensions that drove prices up remain incredibly high. The oil volatility index (OVX) has surged to over 55, its highest point in over a year, signaling that the market is bracing for more significant price swings.

Strategy Considerations For Elevated Volatility

With the threat of a wider conflict paused, we believe attention will shift back to weak fundamentals. The recent EIA report confirmed a 3 million barrel build in US crude stocks, well above expectations and pointing to soft demand. If the ceasefire holds, the market may re-focus on stubborn US inflation data and the prospect of the Federal Reserve keeping rates higher for longer, which would further dampen the outlook for oil.

However, we must recognize the ceasefire is incredibly fragile and is only scheduled to last for two weeks. Continued Israeli action in the region or any disruption to shipping through the Strait of Hormuz could cause the war premium to return instantly, sending prices spiking back toward $100 per barrel. Therefore, buying long-dated call options could be a prudent way to position for a potential flare-up while clearly defining the maximum risk.

Given the high probability of a significant price move in either direction, strategies like a long straddle, which profits from a large move up or down, may be appropriate. This approach benefits from the extreme uncertainty, regardless of whether the ceasefire holds or breaks down violently. Looking back at the price action in 2025, we saw how sensitive the market was to OPEC+ production announcements, and a similar level of headline-driven volatility should be expected now.

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USD/JPY fell towards 158.30 on Wednesday as a two-week ceasefire between the US, Iran and Israel briefly lifted risk appetite. Reports of continued attacks and Israel’s plan to keep operating against Hezbollah in Lebanon point to ongoing instability.

The ceasefire was announced by US President Donald Trump on Truth Social and was linked to reopening the Strait of Hormuz, but the Strait remains closed. A senior Iranian official said it could reopen later this week, before a planned Washington–Tehran meeting in Islamabad, Pakistan.

Iran Terms Keep Risk Elevated

Iran has set out conditions including continuing nuclear enrichment, controlling and charging fees for Strait passage, full sanctions relief, a US military withdrawal from the region, and compensation for war damage. These terms lower the likelihood of a durable deal and keep geopolitical risk elevated.

On the four-hour chart, USD/JPY trades at 158.35 and stays below the 20-period SMA at 159.36 and the 100-period SMA at 159.23. The pair is also below 158.46, while RSI is 31.5, near oversold territory.

Resistance stands at 158.46, then 159.23 and 159.36. Support sits at 158.25, then 158.05 and 157.89, with a break below that area raising the chance of a deeper pullback.

The initial drop in USD/JPY toward 158.30 is a knee-jerk reaction to the ceasefire headline, but we see this as a temporary move. The market is pricing in the best-case scenario, ignoring the high probability of the agreement collapsing. This dip presents an opportunity to position for a reversal when risk aversion returns.

Volatility Strategy Outlook

Given the extreme demands from Iran and ongoing Israeli operations, the ceasefire is unlikely to last the full two weeks. We should therefore consider buying volatility, as the current calm is fragile. The Cboe/CME FX Yen Volatility Index (JYVIX) has only eased to 9.8 from its recent peak above 12, indicating the options market is still pricing in significant uncertainty ahead.

The continued closure of the Strait of Hormuz is the most critical factor, reminiscent of the supply chain shocks we saw in late 2025 which sent oil prices soaring. Data from last week showed global oil inventories falling by 3.1 million barrels, a trend that will accelerate if the strait remains blocked. This situation favors a stronger US dollar as a safe-haven currency.

Therefore, we believe traders should look at buying out-of-the-money USD/JPY call options expiring in late April or May. A move back above the 159.25 resistance seems highly probable once the market’s focus shifts from the ceasefire announcement to the lack of tangible progress. Using call spreads could be a cost-effective strategy to capitalize on the expected rebound.

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Gold rose to a three-week high after news of a two-week ceasefire between the United States and Iran, then pared gains. XAU/USD traded near $4,755, up almost 1%, after an intraday high of $4,857.

Donald Trump said attacks on Iran would be suspended for two weeks if Tehran ensures the “complete, immediate, and safe opening of the Strait of Hormuz”. Iran’s Foreign Minister Abbas Araghchi said safe transit could be maintained with coordination from Iranian armed forces.

Ceasefire Talks And Market Reaction

The first negotiation round is due in Islamabad on Friday to discuss Iran’s 10-point peace proposal. The US Dollar Index traded near 98.80, down about 0.87%, while global equities rose.

Iran’s TasnimNewsAgency cited an unnamed source saying Tehran could leave the ceasefire if attacks on Lebanon continue. Oil also fell, with WTI down more than 10% to about $87, easing inflation pressure.

Markets awaited the Federal Reserve’s March meeting minutes later in the American session, while recent US Nonfarm Payrolls data pointed to a stable labour market. Technically, XAU/USD stayed below the 50-day SMA at $4,927.91 and above the 100-day SMA at $4,667.44, with RSI (14) near the midline and MACD positive.

We saw last year how the US-Iran ceasefire caused a rapid spike and then a partial retracement in gold prices. That event teaches us that geopolitical de-escalation news can create “sell the news” opportunities for short-term traders. Given the current tensions in the Middle East, we should be prepared for similar volatility spikes on any peace-related headlines.

Options Strategies After News Driven Rallies

This means traders should consider selling out-of-the-money call options or implementing bear call spreads on gold after a sharp, news-driven rally. Implied volatility tends to jump on such events, making option premiums expensive and profitable to sell. For instance, we saw volatility in gold options (GVZ) rise over 15% during similar periods of tension in late 2023, providing rich premiums.

Unlike the scenario in 2025 where oil prices slumped, the current environment is different. WTI crude has remained firm, trading above $86 a barrel throughout this past week due to OPEC+ supply discipline and ongoing risk factors. This sustained high price for oil is keeping inflation concerns at the forefront for the Federal Reserve.

The market has had to adjust its expectations for Fed policy this year, a key difference from the hopes of rate cuts we saw after the 2025 ceasefire. The most recent Consumer Price Index (CPI) report showed inflation holding stubbornly at 3.5% annually, which has pushed the market to price in fewer rate cuts for 2026. This “higher for longer” interest rate outlook should act as a headwind for non-yielding gold.

Technically, gold recently broke to all-time highs above $2,350 an ounce, but this rally appears overextended. We are watching for signs of exhaustion, with potential support now near the $2,280 level. A break below that could signal a deeper correction, creating opportunities for traders using put options or put spreads to hedge long positions or speculate on a downturn.

Furthermore, the US Dollar Index (DXY) is not cooperating as it did during the 2025 event, currently trading strong above the 105.50 level. This strength is a direct result of the repricing of Fed expectations versus other central banks. A strong dollar makes gold more expensive for foreign buyers and often pressures its price lower.

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US stock index futures rose after President Donald Trump paused planned strikes on Iran for two weeks, linked to a conditional reopening of the Strait of Hormuz. DJIA futures added about 1,200 points (near 2.6%), with S&P 500 up about 2.4% and Nasdaq up about 2.8%.

Pakistan brokered the pause after Prime Minister Shehbaz Sharif urged a delay and asked Iran to reopen the strait. Iran said safe passage would be possible for two weeks with coordination, and talks are due in Islamabad on Friday.

Market Response And Volatility

Oil prices fell as blockade fears eased. WTI dropped over 17% to about $93, the steepest one-day fall since 2020, after trading above $115 earlier in the week; Brent fell over 16% to around $92.

Around a fifth of global oil supply passes through Hormuz in peacetime, and MarineTraffic said the first vessels passed on Wednesday. Maersk said it was making no changes, and overall traffic was still limited.

Market volatility eased, with the VIX down about 15% to near 22 from above 25. Semiconductor shares led, with SMH up close to 5%, Broadcom up about 4% and Micron up 7%.

Energy shares fell, with Exxon and Chevron each down over 5%, after the sector rose about 34% in 2026. South Korean equities rose 8%, and the iShares MSCI Emerging Markets ETF gained about 5%.

Risk Signals And Hedging Ideas

The truce faced early strain as Israel carried out more than 100 strikes in 10 minutes across Beirut, southern Lebanon and the Bekaa Valley. Lebanon reported dozens killed and hundreds wounded, while Saudi Arabia said it intercepted nine drones.

Gold rose about 2% to near $4,820 per ounce, and the US Dollar Index fell over 1% to around 98.50. Russell 2000 was up over 5% for the year, while the Dow, Nasdaq and S&P 500 remained down year to date.

The Cboe Volatility Index (VIX) has collapsed to 22, but we should not mistake this for calm. Historically, the VIX average is closer to 19, meaning the market is still on edge and pricing in significant risk over the next 30 days. This drop makes buying protection cheaper, so we should consider purchasing put options on broad indices or call options on the VIX itself to guard against the truce failing.

We are seeing a massive 17% drop in WTI crude oil, which is a reminder of the volatility seen during the 2022 Ukraine invasion and the 2020 pandemic lockdowns. Given that about 21% of the world’s oil supply normally passes through the Strait of Hormuz, this temporary reopening creates a clear opportunity. We should look at buying call options on oil futures or energy ETFs, as they have become significantly cheaper and would profit immensely if the waterway closes again.

The sharp rally in stock futures is based entirely on a temporary, two-week deal that is already showing signs of stress. This provides us an ideal moment to structure defensive trades at a lower cost than was possible last week. We should use this market strength to buy put options on the S&P 500 or Nasdaq 100 as a direct hedge against a rapid reversal if talks in Islamabad break down.

The market has clearly defined the winners and losers, with semiconductor stocks surging while energy stocks have been hammered. This divergence allows us to place targeted bets on the outcome of the ceasefire. We can sell bullish put spreads on the VanEck Semiconductor ETF to collect premium if the truce holds, or buy cheap call options on beaten-down stocks like Exxon Mobil as a leveraged play on the conflict resuming.

We must pay close attention to the fact that gold is rallying while the U.S. dollar is falling. This is a contradictory signal, as a falling dollar typically reflects a risk-on mood, while rising gold indicates persistent safe-haven demand. This divergence tells us the market is not fully buying into the peace narrative, making strategies that bet on a return to chaos a prudent move.

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Hungary’s inflation rate in March 2026 came in lower than expected, but it was still above February’s 10-year low, based on data from the Hungarian Central Statistical Office (HCSO). The increase from February was described as moderate, with inflation rising by less than expected.

Core inflation, which excludes volatile items such as fuel price changes, fell compared with the previous month. It eased to 1.9% year on year in March 2026.

Inflation Path And Forecasts

Forecasts referenced in the report place year-on-year inflation at about 3.0–3.5% by the end of the first half of 2026. It is projected to reach around 4.5% by the end of 2026.

The outlook includes risks linked to higher energy prices and volatility in the Hungarian forint (HUF). Average inflation for 2026 is estimated to be near, but somewhat above, the National Bank of Hungary’s 3% target.

The recent March inflation data came in lower than we anticipated, suggesting the immediate pressure on the central bank to act has eased. This unexpected dip, with core inflation falling to 1.9%, gives policymakers some breathing room in the short term. For now, this lessens the probability of a surprise interest rate hike in the next policy meeting.

This view is reinforced by the continued volatility in energy markets, where Brent crude prices have climbed over 8% in the past month due to geopolitical tensions. Looking back, we saw similar energy-driven inflation spikes in 2025 which the central bank eventually had to fight with aggressive policy. Therefore, we are closely watching currency markets, as the Forint’s recent fluctuations between 395 and 405 against the Euro add another layer of uncertainty.

Second Half Rates And Currency Risks

Our focus is shifting towards the second half of the year, as we project inflation will accelerate towards 4.5%. This creates a disconnect between the market’s current calm and the expected future pressure on interest rates. This suggests that forward rate agreements pricing in rate hikes for late 2026 could be undervalued.

Given the explicit risk of Forint volatility, options strategies may be prudent for managing currency exposure. Straddles or strangles on the EUR/HUF pair could be a way to position for a significant price move, without betting on the specific direction. The current stability might offer relatively cheap entry points for volatility plays before the expected inflation numbers begin to rise.

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WTI fell more than 10% on Wednesday after a temporary ceasefire agreement between the United States and Iran reduced price support linked to conflict risk. WTI traded near $89.50 per barrel after hitting an intraday low near $86, its lowest level since 25 March.

US President Donald Trump said the US would suspend attacks on Iran for two weeks if Tehran ensures the full reopening of the Strait of Hormuz. Iran indicated safe transit through the route could be maintained during this period.

Market Reaction And Geopolitical Risk

Prices later stabilised, with reports of airstrikes between Israel and Lebanon and warnings from Iranian officials that Iran could withdraw from the ceasefire if attacks continue. The Financial Times also reported an attack on Saudi Arabia’s East-West pipeline, which moves crude from the Gulf to the Red Sea for export.

Attention is on the ceasefire’s durability, the Strait of Hormuz, and US-Iran talks due later this week. In US data, the EIA reported crude inventories rose by 3.081 million barrels, versus 5.451 million the prior week and above expectations for a 0.7 million build.

WTI is a US crude benchmark traded via the Cushing hub and is classed as light and sweet. Its price is driven by supply and demand, political disruption, OPEC decisions, the US Dollar, and weekly inventory data from API and EIA.

The sharp 10% drop in WTI prices is a direct result of the temporary US-Iran ceasefire, which removed the immediate war premium from the market. We see this as a classic “sell the news” event, but the underlying tensions that drove prices up remain incredibly high. The oil volatility index (OVX) has surged to over 55, its highest point in over a year, signaling that the market is bracing for more significant price swings.

Strategy Considerations For Elevated Volatility

With the threat of a wider conflict paused, we believe attention will shift back to weak fundamentals. The recent EIA report confirmed a 3 million barrel build in US crude stocks, well above expectations and pointing to soft demand. If the ceasefire holds, the market may re-focus on stubborn US inflation data and the prospect of the Federal Reserve keeping rates higher for longer, which would further dampen the outlook for oil.

However, we must recognize the ceasefire is incredibly fragile and is only scheduled to last for two weeks. Continued Israeli action in the region or any disruption to shipping through the Strait of Hormuz could cause the war premium to return instantly, sending prices spiking back toward $100 per barrel. Therefore, buying long-dated call options could be a prudent way to position for a potential flare-up while clearly defining the maximum risk.

Given the high probability of a significant price move in either direction, strategies like a long straddle, which profits from a large move up or down, may be appropriate. This approach benefits from the extreme uncertainty, regardless of whether the ceasefire holds or breaks down violently. Looking back at the price action in 2025, we saw how sensitive the market was to OPEC+ production announcements, and a similar level of headline-driven volatility should be expected now.

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USD/JPY fell towards 158.30 on Wednesday as a two-week ceasefire between the US, Iran and Israel briefly lifted risk appetite. Reports of continued attacks and Israel’s plan to keep operating against Hezbollah in Lebanon point to ongoing instability.

The ceasefire was announced by US President Donald Trump on Truth Social and was linked to reopening the Strait of Hormuz, but the Strait remains closed. A senior Iranian official said it could reopen later this week, before a planned Washington–Tehran meeting in Islamabad, Pakistan.

Iran Terms Keep Risk Elevated

Iran has set out conditions including continuing nuclear enrichment, controlling and charging fees for Strait passage, full sanctions relief, a US military withdrawal from the region, and compensation for war damage. These terms lower the likelihood of a durable deal and keep geopolitical risk elevated.

On the four-hour chart, USD/JPY trades at 158.35 and stays below the 20-period SMA at 159.36 and the 100-period SMA at 159.23. The pair is also below 158.46, while RSI is 31.5, near oversold territory.

Resistance stands at 158.46, then 159.23 and 159.36. Support sits at 158.25, then 158.05 and 157.89, with a break below that area raising the chance of a deeper pullback.

The initial drop in USD/JPY toward 158.30 is a knee-jerk reaction to the ceasefire headline, but we see this as a temporary move. The market is pricing in the best-case scenario, ignoring the high probability of the agreement collapsing. This dip presents an opportunity to position for a reversal when risk aversion returns.

Volatility Strategy Outlook

Given the extreme demands from Iran and ongoing Israeli operations, the ceasefire is unlikely to last the full two weeks. We should therefore consider buying volatility, as the current calm is fragile. The Cboe/CME FX Yen Volatility Index (JYVIX) has only eased to 9.8 from its recent peak above 12, indicating the options market is still pricing in significant uncertainty ahead.

The continued closure of the Strait of Hormuz is the most critical factor, reminiscent of the supply chain shocks we saw in late 2025 which sent oil prices soaring. Data from last week showed global oil inventories falling by 3.1 million barrels, a trend that will accelerate if the strait remains blocked. This situation favors a stronger US dollar as a safe-haven currency.

Therefore, we believe traders should look at buying out-of-the-money USD/JPY call options expiring in late April or May. A move back above the 159.25 resistance seems highly probable once the market’s focus shifts from the ceasefire announcement to the lack of tangible progress. Using call spreads could be a cost-effective strategy to capitalize on the expected rebound.

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Gold rose to a three-week high after news of a two-week ceasefire between the United States and Iran, then pared gains. XAU/USD traded near $4,755, up almost 1%, after an intraday high of $4,857.

Donald Trump said attacks on Iran would be suspended for two weeks if Tehran ensures the “complete, immediate, and safe opening of the Strait of Hormuz”. Iran’s Foreign Minister Abbas Araghchi said safe transit could be maintained with coordination from Iranian armed forces.

Ceasefire Talks And Market Reaction

The first negotiation round is due in Islamabad on Friday to discuss Iran’s 10-point peace proposal. The US Dollar Index traded near 98.80, down about 0.87%, while global equities rose.

Iran’s TasnimNewsAgency cited an unnamed source saying Tehran could leave the ceasefire if attacks on Lebanon continue. Oil also fell, with WTI down more than 10% to about $87, easing inflation pressure.

Markets awaited the Federal Reserve’s March meeting minutes later in the American session, while recent US Nonfarm Payrolls data pointed to a stable labour market. Technically, XAU/USD stayed below the 50-day SMA at $4,927.91 and above the 100-day SMA at $4,667.44, with RSI (14) near the midline and MACD positive.

We saw last year how the US-Iran ceasefire caused a rapid spike and then a partial retracement in gold prices. That event teaches us that geopolitical de-escalation news can create “sell the news” opportunities for short-term traders. Given the current tensions in the Middle East, we should be prepared for similar volatility spikes on any peace-related headlines.

Options Strategies After News Driven Rallies

This means traders should consider selling out-of-the-money call options or implementing bear call spreads on gold after a sharp, news-driven rally. Implied volatility tends to jump on such events, making option premiums expensive and profitable to sell. For instance, we saw volatility in gold options (GVZ) rise over 15% during similar periods of tension in late 2023, providing rich premiums.

Unlike the scenario in 2025 where oil prices slumped, the current environment is different. WTI crude has remained firm, trading above $86 a barrel throughout this past week due to OPEC+ supply discipline and ongoing risk factors. This sustained high price for oil is keeping inflation concerns at the forefront for the Federal Reserve.

The market has had to adjust its expectations for Fed policy this year, a key difference from the hopes of rate cuts we saw after the 2025 ceasefire. The most recent Consumer Price Index (CPI) report showed inflation holding stubbornly at 3.5% annually, which has pushed the market to price in fewer rate cuts for 2026. This “higher for longer” interest rate outlook should act as a headwind for non-yielding gold.

Technically, gold recently broke to all-time highs above $2,350 an ounce, but this rally appears overextended. We are watching for signs of exhaustion, with potential support now near the $2,280 level. A break below that could signal a deeper correction, creating opportunities for traders using put options or put spreads to hedge long positions or speculate on a downturn.

Furthermore, the US Dollar Index (DXY) is not cooperating as it did during the 2025 event, currently trading strong above the 105.50 level. This strength is a direct result of the repricing of Fed expectations versus other central banks. A strong dollar makes gold more expensive for foreign buyers and often pressures its price lower.

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The NASDAQ 100 rose 3.5% at Wednesday’s open, its largest single-session percentage gain since 12 May 2025. The move followed US President Donald Trump agreeing to a two-week ceasefire with Iran late Tuesday.

Israel said it would continue fighting in Lebanon against Hezbollah, and hostilities continued overnight between Hezbollah, Israel and Iran. The ceasefire agreement calls for Iran to reopen the Strait of Hormuz to Gulf nations’ oil.

Nasdaq Rally Cools After Early Surge

After the initial jump, the NASDAQ 100 eased to a 2.4% gain as traders took profits. US WTI crude fell 15% on the ceasefire news, while US oil prices were still above $90 a barrel.

The index had dropped nearly 13% one month into the war and is now a little more than 5% below all-time highs. It faces resistance near 25,180 (early March highs) and 25,330 (February resistance).

The NASDAQ 100 is trading above its 50-day Simple Moving Average for the first time since early February. Further support is near the 200-day Simple Moving Average around 24,500, with an all-time high at 26,182 from late October 2025.

Given the sharp rally and break above the 50-day moving average, we see an opportunity to position for further upside using call options. Traders could consider buying calls with strike prices targeting the March resistance near 25,180 and ultimately the late October 2025 all-time high. Using longer-dated expirations, such as those in May or June, would provide time for the gradual rise to play out.

Hedging Risk Amid Fragile Ceasefire

However, the ongoing conflict between Israel and Hezbollah makes the ceasefire with Iran fragile, creating significant downside risk. To hedge against a sudden reversal, purchasing put options with strikes near the 200-day moving average around 24,500 offers protection. This level should act as a firm floor if geopolitical tensions flare up again and the short-term peace deal collapses.

The market is pricing in this uncertainty, even after yesterday’s move. The CBOE NDX Volatility Index (VXN) fell over 20% but remains elevated at 28, well above the 2025 average of 19. This suggests that option sellers are still demanding high premiums, reflecting the binary risk of either a sustained peace rally or a sharp conflict-driven sell-off.

We must also watch oil prices, as they are a key driver of inflation and economic stability. While WTI crude’s 15% drop is a positive sign, the price settling near $92 a barrel is still historically high. The latest EIA report shows U.S. crude inventories are still 8% below their five-year average, meaning any disruption to the Strait of Hormuz could send prices soaring again.

This situation feels similar to the relief rallies we saw in early 2022 following the initial shock of the Ukraine invasion, which were often met with reversals on negative headlines. Open interest data shows a recent surge in out-of-the-money NASDAQ 100 calls, indicating that bullish speculation is building quickly. This crowded positioning could lead to a sharp pullback if the positive narrative around the ceasefire begins to weaken.

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Brent fell by USD 15 after reports of a 14-day U.S.–Iran ceasefire and the reopening of the Strait of Hormuz. Despite this drop, Brent traded near USD 95 per barrel, above levels seen before the war.

Uncertainty remains over whether the ceasefire will be observed in full. There is also uncertainty about how quickly shipping through the Strait of Hormuz can return to normal.

Market Risks Remain Elevated

The International Energy Agency reported damage to energy infrastructure that may slow any recovery in supply. IEA head Fatih Birol said about 75 energy assets were “severely or very severely” damaged.

Reconstruction costs have been estimated at around USD 25 billion, with gas infrastructure and refineries among the worst affected. Ongoing supply disruptions are expected, especially for gas and middle distillates.

After the ceasefire announcement, European gas prices fell by nearly 20% for a short time. Even with the Strait of Hormuz open for 14 days, supply conditions remain complex.

Gas market conditions remain tight, with prices still trading well above pre-crisis levels.

Trading Implications And Positioning

We are seeing Brent crude prices settle around $95 a barrel after the initial relief from the two-week U.S.-Iran ceasefire. This drop from over $110 offers a brief window, but the price remains well above the pre-conflict levels we saw in 2025. This persistent premium reflects the market’s deep-seated anxiety about whether this truce will actually hold.

This ceasefire introduces significant uncertainty, which is a recipe for high volatility in the coming weeks. We’ve seen the CBOE Crude Oil Volatility Index (OVX) spike over 50 during similar periods of geopolitical stress in the past, like the events of 2022. Traders should therefore consider strategies that profit from large price swings, as the market will react sharply to any news of ceasefire violations or extensions.

The damage to 75 energy assets in the region is a critical factor that the market seems to be underestimating right now. These aren’t quick fixes, and the disruption to middle distillates is already showing up in refining margins. The crack spread, a key indicator of refinery profitability, has widened to nearly $35 per barrel, reflecting a tight market for diesel and jet fuel that will persist long after these two weeks are over.

We should also watch European natural gas prices closely as a sister market. The temporary 20% drop in TTF futures shows how tightly linked these markets have become since the energy crisis we saw back in 2022. Any renewed tension will likely send both gas and oil prices sharply higher in tandem.

Given this, the recent price dip looks like a chance to enter bullish positions, perhaps using call options to limit downside risk. Buying options dated three to six months out would allow us to bypass the current short-term noise and position for the supply tightness we expect to see later this year. For those uncertain of direction but certain of a large move, a long straddle could prove profitable.

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