Key Points

• USOil near $100 to $150 keeps inflation risk live and limits room for the Fed.
• USDX stays firm as Strait of Hormuz tension blocks cleaner risk recovery.
• SP500 remains vulnerable while high oil prices squeeze growth expectations.
• BTCUSD still behaves like risk, even as the CLARITY Act starts to reshape crypto.
• JOLTS and Non-Farm Payrolls will test whether growth is slowing further.
• XAUUSD faces a push and pull between safe haven demand and dollar strength.

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The market is not waiting for data first. It is waiting for oil to blink.

The conflict remains the main source of market anxiety. A 15-point peace proposal has been floated through intermediaries in Pakistan, but Tehran says no talks have happened and rejects the plan.

Pakistan says it's preparing to host "meaningful talks" to end the US-Israel war with Iran even as Tehran accuses Washington of secretly planning a land assault while sending messages about possible negotiations https://t.co/lxTTcMOAPH pic.twitter.com/93EKWez9Cc

— Reuters (@Reuters) March 29, 2026

Iran is demanding full sovereignty over the Strait of Hormuz and a halt to all US-Israeli operations before any dialogue begins. That stand-off is keeping USDX elevated, leaving the S&P 500 under pressure and preventing traders from committing to a clearer risk-on view.

The core macro tension is now easy to spot. Each time peace hopes fade, oil jumps. Once oil holds near $100 to $150, the market stops treating this as just a war story and starts pricing it as a global cost-of-living and stagflation problem.

The Stagflation Trade

The market is no longer treating this as a headline-driven war scare that will fade in a few sessions. It is starting to price the slower damage that comes when conflict keeps energy markets tight for too long.

That is the shift underneath the tape. Each time peace hopes wobble, oil pushes up again. Once crude sits in a $100 to $150 range, the issue gets bigger than geopolitics. It starts to feed into freight, production, food, and household costs. That is when traders stop asking whether there is a war premium in oil and start asking whether the global economy is being pushed into a stagflation problem.

Iran war latest:

– Trump says Iran gave US most of 15 demands to end war
– Oil advanced as Houthi militants in Yemen entered conflict
– Aluminum stocks soar after two key producers hit
– Pakistan is ready to facilitate peace talks
– S&P 500 futures, shares in Tokyo and Seoul…

— Bloomberg (@business) March 30, 2026

That is also why the mood feels heavy even on quieter days. The market is not waiting for one dramatic escalation. It is watching a more grinding risk build in the background, where growth slows but inflation does not cool in the way central banks would want.

Read more about the movement of oil prices and how it affects the global economy here.

The Fed and Why Risk Cannot Relax

This is where the old market playbook starts to break down. In a normal slowdown, traders would look to central banks for support. In this environment, that support looks less certain because high energy prices can keep inflation alive even as activity softens.

Federal Reserve Bank of Richmond President Tom Barkin said the US-Israel war in Iran threatens to add to already elevated inflationary pressures and clouds the economic outlook at a time when the labor market is fragile https://t.co/z7fIfBrDRW

— Bloomberg (@business) March 27, 2026

That leaves policymakers in an awkward position. They may want to lean more supportive if growth weakens, but they cannot do that freely if oil is still feeding price pressure through the system. The result is a market that feels stuck between two problems at once. Growth looks more fragile, but inflation risk has not gone away.

That is why risk sentiment still struggles to settle. Traders are not just nervous about weaker data. They are nervous about weaker data arriving in a world where policy relief may come later and do less when it does arrive.

The CLARITY Act and a Market Still Trading Risk

At the same time, while the old world of stocks, bonds, and commodities is being pulled around by war and inflation fears, the crypto market is being forced into a more formal structure.

On March 20, 2026, Senators Tillis and Alsobrooks reached a compromise on the CLARITY Act around stablecoin yields. The key change is simple. Direct yield earned just by holding a stablecoin, in the style of a bank deposit, would be prohibited for non-bank entities. Yield tied to actual use, such as payments, transfers, or platform loyalty, would still be permitted.

In the short term, that can take some heat out of the market because passive yield had become part of the growth story for parts of crypto. In the longer term, though, it may end up making the space easier for larger institutions to engage with. The compromise draws a clearer line between what looks like a deposit substitute and what looks like usable financial infrastructure.

Read more about blockchain technology here.

That is why the reaction is mixed rather than cleanly negative or positive. Some parts of the market may lose momentum first. But the broader framework becomes easier to defend if the rules are firmer and the biggest objections from the traditional banking side start to fade.

Key Symbols to Watch

USDX | USOil | BTCUSD | SP500 | USDJPY

Upcoming Events Table

Date	Currency	Event	Forecast	Previous	Analyst Remarks
30 Mar 2026	USD	Fed Chair Speaks	–	–	Tone matters more than guidance while oil drives pricing
31 Mar 2026	USD	JOLTS Jobs Openings	6.90M	6.95M	Softer labour demand could dent USDX after a strong run
03 Apr 2026	USD	Non Farm Employment Change	56K	-92K	A weak rebound would deepen the growth scare
03 Apr 2026	USD	Unemployment Rate	4.40%	4.40%	Any rise would add pressure to equities and risk FX

For a full view of upcoming economic events, check out VT Markets’ Economic Calendar.

Key Movements Of The Week

AUDUSD

• AUDUSD has already broken 0.68965, which keeps the near-term structure tilted lower.
• AUDUSD now needs to consolidate before another move down can develop cleanly.
• AUDUSD remains exposed while USDX stays firm and the market leans defensive.

USDJPY

• USDJPY broke above 159.89 and then cleared the 160.00 handle.
• USDJPY is now trading in a follow-through zone, with 161.943 as the most recent high.
• USDJPY can stay supported while the dollar holds up, though the pair is entering a more sensitive area.

BTCUSD

• BTCUSD is sitting at a crucial area with 2 possibilities now in play.
• BTCUSD could move higher first, but the rally needs to be impulsive and buying should be dialled down above 74,000.
• BTCUSD risks another leg lower if it turns into consolidation, with 60,502 the deeper downside level.
• BTCUSD still carries an overall downward bias unless price breaks higher with force.

SP500

• SP500 has already turned lower as sellers regained control.
• SP500 still looks vulnerable if the next move is another consolidation phase.
• SP500 remains tied to oil, growth fears and whether the Fed stays trapped by inflation.

Will April Bring A Turning Point?

The next date hanging over the market is April 6. That marks the end of the current 10-day tactical pause on strikes against Iranian energy plants. The working assumption in the market is that April could bring a more decisive turning point, even if that still falls short of full peace.

There is also a harder military and economic logic behind that view. One-third of Iran’s missile stockpile is said to be destroyed, another third buried or damaged.

The presence of the 31st MEU, with 3,500 Marines aboard the USS Tripoli, adds to the sense that pressure could ramp up quickly if talks fail. At the same time, there is a very clear economic incentive in the background, which is the push to get Brent crude back below $80 a barrel.

That leaves the market in a familiar place for now. Traders can see the outline of a possible endgame, but they still do not know whether it brings de-escalation, a harder strike phase, or a slower proxy conflict that drags through the rest of 2026.

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Trader FAQs

Why is Oil More Important Than Data Right Now?

Because oil is shaping inflation, growth and rate expectations at the same time. That makes it the market’s main transmission channel this week.

Why is Bitcoin Still Weak if Regulation is Improving?

Because the short-term macro backdrop is still tight. CLARITY Act progress may help later, but for now BTCUSD is still trading like risk.

What is the Main Market Risk This Week?

The main risk is that oil stays elevated while US data softens. That would deepen the stagflation trade and keep pressure on equities and risk assets.

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The Japanese Yen rose against major peers in Asian trading on Monday. It ended a four-day decline versus the US Dollar and was 0.2% lower at about 160.00 per dollar. The move followed comments from Bank of Japan Governor Kazuo Ueda. He said foreign exchange moves have a “huge impact on Japan’s economy, and prices”, and that the central bank will watch FX moves closely.

Bank Of Japan Signals On Policy And Markets

His remarks came after the Summary of Opinions from the March policy meeting. The summary said several policymakers still expected more monetary tightening soon. It also stated that one member said the BoJ should raise the policy rate without hesitation if the economic environment does not deteriorate and if small and midsized firms keep their stance. Other members discussed how the war in the Middle East could affect the economy and prices. Most members chose to keep interest rates unchanged at 0.75%. One member said rates could stay steady due to uncertainty over Middle East developments. The US Dollar gave back early gains after President Donald Trump told the Financial Times a deal with Iran was expected “fairly quickly”. He also said Washington could seize Iran’s Kharg Island “very easily”.

Dollar Moves And Intervention Risk

The US Dollar Index was flat near 100.15. We remember when the Bank of Japan issued a strong warning in 2025 as the dollar approached 160 yen. Now, on March 30, 2026, with the pair trading around 172.50, that past intervention threat has become a very real and present danger for anyone holding long dollar positions. The market’s memory is short, but the Ministry of Finance’s is not, especially after they spent a record ¥9.8 trillion on intervention back in late 2025. The core issue remains the vast interest rate differential, which has only widened since last year. While the BoJ has nudged its policy rate to 1.00%, this is dwarfed by the US Federal Reserve’s rate, which has held firm at 5.25% to combat stubbornly persistent services inflation. This gap continues to fuel the carry trade, creating constant upward pressure on the USD/JPY pair despite the verbal warnings from Tokyo. For traders, this signals a period of heightened tail risk and a spike in expected volatility over the coming weeks. One-month implied volatility on USD/JPY options has already climbed above 12%, reflecting the market’s anxiety about sudden, sharp downside moves. This makes buying protection or placing speculative bets via options increasingly attractive. The most direct strategy involves purchasing out-of-the-money USD/JPY puts with expirations in late April and May 2026. These positions offer a defined-risk way to profit from a potential plunge of several hundred pips should the BoJ decide to act decisively. The cost of these options is rising, so timing is becoming critical. We must also watch for key US data, as a surprisingly weak Non-Farm Payrolls report, due this Friday, could do the BoJ’s job for it. A faltering in the US jobs market would weaken the dollar across the board and could trigger a rapid unwind of long USD/JPY positions. This confluence of intervention risk and potential US data weakness makes holding unhedged long positions extremely precarious. Create your live VT Markets account and start trading now.

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On Monday, the People’s Bank of China (PBOC) set the USD/CNY central rate at 6.9223, compared with Friday’s fix of 6.9141. The PBOC’s main monetary policy aims are to keep prices stable, including exchange rate stability, and support economic growth. It also carries out financial reforms linked to opening and developing China’s financial market.

Pboc Governance And Role

The PBOC is owned by the state of the People’s Republic of China, so it is not an autonomous institution. The Chinese Communist Party Committee Secretary, nominated by the Chairman of the State Council, shapes the bank’s management and direction, and Pan Gongsheng holds both posts. The PBOC uses several policy tools, including the seven-day reverse repo rate, the Medium-term Lending Facility, foreign exchange intervention, and the reserve requirement ratio. China’s benchmark interest rate is the Loan Prime Rate, which affects loan, mortgage, and savings rates and can also affect the renminbi exchange rate. China has 19 private banks. The largest include digital lenders WeBank and MYbank, and in 2014 China allowed domestic lenders fully funded by private capital to operate in the state-led sector. Today’s move by the People’s Bank of China to set the USD/CNY rate higher, at 6.9223, signals a clear tolerance for a weaker yuan. This is a significant adjustment from last week’s fixing and suggests that supporting the economy is a top priority. For us, this opens the door to positioning for further depreciation in the Chinese currency. We see this decision as a direct response to recent economic data which has shown some weakness. Industrial output for February 2026 registered at 4.9%, missing forecasts, while new export orders have also softened according to the latest PMI data released last week. A weaker currency makes Chinese goods cheaper for foreign buyers, providing a necessary tailwind for the manufacturing sector.

Market Implications And Positioning

Looking back, we remember how the central bank defended the yuan for much of 2025, holding it in a tight range to ensure financial stability amidst a shaky property market. This new stance contrasts with last year’s policy, indicating a pivot where growth is now being prioritized over exchange rate stability. It suggests the authorities are now more comfortable with a controlled depreciation to stimulate activity. For the coming weeks, we should consider strategies that profit from a rising USD/CNY. Buying call options on the currency pair is a straightforward way to position for further yuan weakness while limiting downside risk. Implied volatility has ticked up to 9.2% from last month’s average of 8.5%, but there is likely room for it to move higher if the currency continues its trend. We will be closely watching for follow-through signals from the PBOC, particularly the next setting of the Loan Prime Rate (LPR). A cut to the one-year LPR, which was last trimmed in August of 2025, would confirm this easing stance. Any such move would likely accelerate the yuan’s managed decline against the dollar. Create your live VT Markets account and start trading now.

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USD/CHF rose back from about 0.7970 in Asia on Monday and reached its highest level since 19 January. It then held just under 0.8000 and was little changed on the day. The US Dollar found support as fighting in the Middle East increased, lifting demand for reserve currencies. Reports said the Pentagon was preparing for weeks of ground operations in Iran, and Yemen’s Iran-backed Houthis joined the conflict.

Middle East Tensions Support The Dollar

The Houthis said they launched two missiles at Israel within 24 hours and warned of more attacks in the coming days. The report also cited concerns that disruption in the Bab el-Mandeb Strait, alongside the effective closure of the Strait of Hormuz, could hit global trade. Higher oil prices added to inflation worries and supported expectations of tighter US Federal Reserve policy, which helped the Dollar. Even so, the pair lacked follow-through, with attention on whether it can hold above 0.8000 before extending the month’s rise. The Swiss Franc is among the 10 most traded currencies and was pegged to the euro from 2011 to 2015; when the peg ended, it rose by more than 20%. Switzerland targets inflation below 2%, and the Swiss National Bank meets four times a year. We recall the environment back in early 2025, where geopolitical tensions were a primary driver for a stronger US dollar. The conflict in the Middle East fueled safe-haven demand for the greenback, pushing USD/CHF toward the 0.8000 resistance level. At the time, fears of rising oil prices disrupting global trade created expectations for a hawkish Federal Reserve.

Central Banks Drive The New Narrative

The landscape has since shifted dramatically as we enter the second quarter of 2026. Diplomatic efforts throughout late 2025 led to a de-escalation in the Middle East, reducing the dollar’s appeal as a conflict hedge. The market’s focus has now moved away from geopolitics and squarely onto the diverging actions of central banks in a cooling global economy. Inflation, the major concern a year ago, has subsided significantly. The latest US Consumer Price Index report for February 2026 showed headline inflation at 2.5% year-over-year, well below the highs seen during the 2024-2025 period. This trend has given the Federal Reserve the room it needed to change its stance on monetary policy. In response to slowing growth and tamed inflation, the Fed initiated its first interest rate cut of 25 basis points at its meeting last week. This pivot has confirmed a new easing cycle, fundamentally weakening the outlook for the US dollar. We expect this to weigh on the USD/CHF pair for the foreseeable future. However, the Swiss National Bank (SNB) is also in an easing mood, having already cut its own policy rate earlier this month. Swiss inflation is even lower, tracking at just 1.1%, giving the SNB a strong incentive to prevent the franc from appreciating and harming its export-driven economy. This creates a dynamic where both currencies are weakening, making volatility a key factor. Given that both the Fed and the SNB are now cutting rates, the direction of USD/CHF will depend on which bank is perceived as more dovish. With the pair currently trading around 0.9150, the 0.8000 level of 2025 is a distant memory. We should consider using options to trade the expected volatility around upcoming central bank announcements rather than placing simple directional bets. For the coming weeks, we see value in strategies that benefit from price swings. Buying straddles or strangles ahead of the next SNB or Fed meetings could be an effective way to capitalize on the uncertainty. Alternatively, traders who believe the Fed’s easing will outpace the SNB’s could look at buying call options with strikes above 0.9200. Create your live VT Markets account and start trading now.

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NZD/USD fell for a fifth straight session, trading near 0.5730 in Asia on Monday and slipping below 0.5750. The move came as risk aversion rose amid fears of a possible US ground invasion in Iran. The Wall Street Journal reported last week that the US Pentagon is considering sending 10,000 additional troops to Iran. Iranian state TV aired comments from Ebrahim Zolfaqari saying “US troops will be good food for sharks of the Persian Gulf.”

Key US Data In Focus

This week, US releases such as labour-market indicators, Nonfarm Payrolls, and the ISM Purchasing Managers’ Index may affect expectations for Federal Reserve policy. These data points are being watched for shifts in the US rate outlook. In New Zealand, the ANZ–Roy Morgan Consumer Confidence Index dropped to 91.3 in March from 100.1 in February. ANZ Business Confidence and Activity Outlook figures are due on Tuesday, while China’s March PMI readings are also in focus. RBNZ Governor Anna Breman said the bank would look through temporary energy-driven inflation but could raise rates if price pressures persist and inflation expectations loosen. Markets have increasingly priced in earlier tightening since the conflict began, due to higher energy costs. We remember how the NZD/USD broke below 0.5750 this time last year amid escalating tensions between the United States and Iran. That period of intense risk aversion reinforced the Kiwi’s sensitivity to global conflicts, where investors flee to the safety of the US dollar. This fundamental dynamic remains a key risk for the currency pair today.

Volatility And Positioning

Renewed diplomatic friction reported over the past month has already pushed the CBOE Volatility Index (VIX) back above 24, a level that signals growing unease in the market. Historically, when the VIX sustains levels above 20, the NZD has underperformed against the USD in 8 of the last 10 instances since 2020. This suggests traders are once again buying protection, creating a difficult environment for risk-sensitive currencies like the Kiwi. Given this backdrop, we should consider strategies that profit from increased volatility and potential downside. Buying put options on the NZD/USD with strikes around the 0.5650 level offers a direct way to hedge against a sharp decline. The pricing on these options will likely become more expensive if geopolitical headlines worsen, so acting in the near term is critical. The economic divergence we saw forming in 2025 is also adding pressure. The latest US Nonfarm Payrolls report showed a robust gain of 245,000 jobs, cementing expectations that the Federal Reserve will not rush to cut rates. In contrast, New Zealand’s latest business confidence numbers fell for a second straight month, and China’s Caixin Manufacturing PMI dipped to 49.9, signaling a slight contraction for New Zealand’s top trading partner. Last year, the Reserve Bank of New Zealand’s hawkish stance on inflation provided some support, but this is less of a factor now. With global oil prices having stabilized in a range between $70-$80 per barrel for most of the past six months, the threat of an energy price shock has faded. This allows the RBNZ to focus more on slowing domestic growth, making further rate hikes highly improbable. A bear put spread could be an effective way to position for a gradual decline in the NZD/USD without paying for excessive volatility. This strategy, which involves buying a higher-strike put and selling a lower-strike one, lowers the overall cost of the trade. It allows us to profit from a move down toward the 0.5700 to 0.5650 range over the coming weeks. Create your live VT Markets account and start trading now.

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BoJ Governor Kazuo Ueda said on Monday, after the release of the bank’s Summary of Opinions, that foreign exchange (FX) market moves can have a huge impact on Japan’s economy and prices. He said the BoJ will closely watch FX movements. He said that as firms become more active in raising prices and wages, the impact of FX fluctuations on prices has grown. He added that FX swings may also affect underlying inflation through changes in inflation expectations.

BoJ Links Fx Moves To Inflation Risks

Ueda said the BoJ will guide policy by assessing how FX and market moves affect the likelihood of meeting its growth and price forecasts, as well as related risks. He said monetary policy decisions will be made by examining what FX and market changes mean for the goal of stably achieving the 2% inflation target. He said long-term interest rates move in line with market views on the economic and price outlook, and on fiscal and monetary policy. He added that if short-term rates are raised at an appropriate pace, long-term rates should move in a stable manner. After the comments, the yen strengthened, with USD/JPY down 0.26% to near 159.90. We are seeing the Bank of Japan signal a much lower tolerance for Yen weakness. The focus on how foreign exchange moves impact inflation is a clear warning that the era of ignoring the currency’s slide is over. This suggests that the risk of a surprise policy shift or direct intervention to strengthen the Yen has significantly increased.

Trading Implications For Jpy Volatility

This heightened verbal warning comes as Japan’s core inflation for February 2026 registered at 2.8%, remaining stubbornly above the 2% target for nearly a full year. The continued pressure on USD/JPY, which we saw test the 160 level multiple times in 2025, is now being directly linked to these persistent price pressures. Traders should see this as the BoJ building a case for more hawkish action. The timing is critical, coming just after the preliminary results of the 2026 “shunto” spring wage negotiations showed average pay hikes exceeding 5%, the highest in over three decades. With wages and import costs both rising, the central bank’s concern about a wage-price spiral is becoming its primary focus. This fundamentally changes the outlook for Japanese monetary policy. For derivative traders, this means the implied volatility on JPY currency pairs is likely undervalued. We believe purchasing puts on USD/JPY or establishing bearish risk reversals are prudent strategies to hedge against, or profit from, a sudden drop in the exchange rate. The cost of these options may rise as the market digests the increased probability of a policy surprise in the coming weeks. Looking back, we recall that direct currency interventions in late 2025 only provided temporary relief for the Yen, as the wide interest rate differential with the US Fed continued to favor carry trades. The shift in language now suggests the BoJ acknowledges that only a change in monetary policy, likely a rate hike, can provide a more durable floor for the currency. This pivot from intervention to interest rate policy is the key takeaway for the market. Create your live VT Markets account and start trading now.

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Gold (XAU/USD) opened more than 1% lower near $4,445 on Monday. WTI oil rose almost 3% to above $102.50, adding to higher inflation expectations. Higher inflation expectations can lead central banks to keep rates steady for longer or tighten policy. That tends to reduce demand for non-yielding assets such as gold.

Middle East Risk And Market Focus

Market attention is on the Middle East after reports that the US is considering a ground invasion of Iran. The Wall Street Journal reported the Pentagon will send 10,000 additional troops to Iran. Reuters reported that US President Donald Trump told the Financial Times that a deal with Iran could come soon. He said indirect talks via emissaries were progressing well and a deal could be made fairly quickly. Technically, gold remains under pressure around $4,445, below the 20-day EMA near $4,735. The RSI is in the 20.00–40.00 range, and price has trended lower from the $5,300 area after breaking below $4,900. Resistance sits at $4,736 and $4,915, with $5,080 above if price closes back over $4,915. Support is near $4,307, then about $4,100 if $4,307 breaks.

Central Bank Demand And Macro Drivers

Central banks added 1,136 tonnes of gold worth around $70 billion in 2022, the highest annual purchase on record. Gold often moves inversely to the US Dollar and US Treasuries, and is priced in dollars. Looking back at the events of 2025, we saw a complex reaction in the markets to the threat of a US ground invasion in Iran. Gold initially fell towards $4,450 on fears of tighter monetary policy, even as oil prices surged past $102 a barrel. The conflicting reports, with President Trump suggesting a deal was near while military posturing increased, created significant uncertainty. Now, in March 2026, those direct military threats have subsided, but underlying tensions in the region remain, keeping a floor under oil prices. The deal mentioned last year never fully materialized, leaving the market highly sensitive to any new developments. This creates an environment where headline risk is still a major factor for both energy and precious metals derivatives. Given the market’s sharp reversal last year, implied volatility on gold options remains elevated. The CBOE Gold Volatility Index (GVZ) has averaged over 18.5 for the past six months, well above its historic norms, indicating the market expects continued price swings. This suggests that buying straddles or strangles could be a viable strategy to profit from sharp price moves in either direction, regardless of the trigger. With crude oil inventories remaining tight, as seen in recent EIA reports showing draws for several consecutive weeks, the market is primed to overreact to supply threats. We should consider using long-dated call options on WTI or Brent to hedge against a sudden price surge. The rapid 3% jump we saw during the 2025 scare serves as a clear historical precedent for this dynamic. On a fundamental level, the long-term case for gold is supported by persistent central bank buying. The latest World Gold Council report for the fourth quarter of 2025 showed that central banks added another 290 tonnes to their reserves, continuing a multi-year trend of accumulation. This activity provides a strong support level, suggesting that significant dips could be viewed as accumulation opportunities. The biggest variable remains the US Federal Reserve’s policy, as the market is currently pricing in a nearly 70% chance of a rate cut by the third quarter, according to the CME FedWatch Tool. Any official signals from the Fed that they might move sooner would likely weaken the dollar and trigger a significant rally in gold. Therefore, we must closely monitor upcoming FOMC statements for any change in tone. Create your live VT Markets account and start trading now.

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Silver (XAG/USD) fell during the Asian session on Monday to the lower end of its recent range. It traded above $68.00 and was down nearly 2.0% on the day. The US-Iran conflict moved into its fifth week, with reports of rising military activity supporting the US Dollar as a safe haven. The Washington Post said the Pentagon is preparing for weeks of ground operations in Iran, including possible raids on Kharg Island and coastal sites near the Strait of Hormuz. Iran’s parliament speaker, Mohammad Bagher Ghalibaf, said Iranian forces are ready to retaliate if US troops are deployed on the ground. Yemen’s Iran-aligned Houthis said they launched two missiles at Israel within 24 hours and warned of more attacks, raising concerns about trade flows through the Bab el-Mandeb Strait. Higher oil prices have added to inflation concerns and expectations of a more hawkish Federal Reserve. Markets have now fully priced out further US rate cuts and are increasing bets on a hike by the end of this year, which has supported the Dollar and pressured non-yielding silver. Technically, silver has traded in a range after breaking below the 100-day simple moving average, which points to downside risk. Traders may still wait for a clear break below the range before expecting further falls. Looking back at the analysis from 2025, we recall a period where silver was being sold off heavily due to rising geopolitical tensions in the Middle East. Now, in late March 2026, the diplomatic channels that opened in late 2025 have significantly reduced those specific conflict risks, calming the market. This fundamental shift away from a crisis footing has changed the entire landscape for precious metals. The fears of a hawkish Federal Reserve that dominated 2025 have faded as oil prices stabilized below $80 a barrel throughout early 2026. With recent US inflation data showing a consistent trend towards the Fed’s target, hovering at 2.5% last month, the dollar has softened considerably. This has led the futures market to price in a 75% probability of at least two rate cuts before the end of this year, which is typically bullish for non-yielding assets like silver. This shift in fundamentals suggests a change in strategy for derivative traders who were previously bearish. We see value in establishing long positions through call options, particularly those with expirations in the third quarter to capture the expected upward move driven by monetary policy easing. The environment is no longer favorable for holding short positions or buying puts. This view is supported by recent Commitment of Traders (CFTC) reports, which show managed money accounts have been steadily increasing their net-long exposure in silver futures. This is a stark reversal from the defensive, net-short positioning we saw for much of the second half of 2025. The flow of institutional money now points towards renewed confidence in silver’s appreciation potential. From a technical standpoint, the bearish breakdown below the 100-day Simple Moving Average in 2025 has proven to be a bear trap. Silver has since reclaimed that level, which is now acting as strong support around the $30.50 mark, and we are seeing a bullish consolidation pattern forming. Traders should view any dips towards this moving average as a buying opportunity rather than a reason to sell.

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Reuters reported comments by US President Donald Trump in an interview with the Financial Times. He said the US could “take the oil in Iran” and could seize Iran’s export hub on Kharg Island. He said Kharg Island could be taken “very easily” and that Iranians have no defence there. He also said the number of Pakistan-flagged oil tankers Iran had allowed through the Strait of Hormuz had doubled to 20.

Conflicting Signals And Market Reaction

Trump said discussions with Tehran were “doing extremely well” and that a deal could be reached “pretty soon”. He said indirect talks via emissaries were progressing well and that a deal could be made “fairly quickly”. Separately, the Wall Street Journal reported on Monday, citing US officials, that Trump is weighing a military operation to extract Iran’s uranium. The WSJ said Washington is also pushing for Iran to hand over the material through negotiations to avoid a high-risk ground operation. Markets showed the US Dollar Index (DXY) near 100.30, up 0.14% on the day. WTI was up 1.40% at $100.40 at the time of writing. We are looking back at the conflicting signals from 2025, where threats against Iranian oil infrastructure were issued alongside claims that diplomatic talks were progressing well. This mix of rhetoric created a blueprint for extreme volatility, pushing WTI crude prices above $100 a barrel. The market learned then that the direction of the next major price move was highly uncertain. The physical risk remains centered on the Strait of Hormuz, a critical chokepoint for global energy supplies. We cannot forget that roughly 20% of the world’s daily oil consumption passes through this narrow channel. This geographical fact is why threats to seize Kharg Island, Iran’s main export terminal, caused such a dramatic spike in implied volatility in the options market.

Options Positioning And Hedging Approaches

Today, with WTI crude trading closer to $85 per barrel, the market seems to have calmed from the peaks seen during the 2025 scare. However, the CBOE Crude Oil Volatility Index (OVX) is still elevated, sitting around 38, which is significantly higher than the peaceful averages below 30 we saw in previous years. This tells us that options traders are still pricing in a considerable risk of a sudden supply disruption in the coming weeks. Given this backdrop, we are advising the purchase of long-dated call options on crude oil futures. This strategy offers exposure to a potential price surge if tensions escalate again, while capping the potential loss at the premium paid for the option. We see value in out-of-the-money calls with strike prices around the psychological $95 mark. For those who are less certain about direction but anticipate a large move, we are positioning with volatility trades. This involves buying straddles, which is the purchase of both a call and a put option with the same strike price and expiration date. This position profits from a significant price swing in either direction, which is the exact scenario suggested by the contradictory statements we saw in 2025. Finally, for those with portfolios sensitive to energy costs, hedging is paramount. We believe purchasing put options on Brent or WTI futures is a prudent insurance policy. This protects against a scenario where a conflict or a broader economic slowdown causes a sudden collapse in global oil demand and prices. Create your live VT Markets account and start trading now.

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The Bank of Japan released the Summary of Opinions from its March monetary policy meeting. Several members said interest rates could keep rising if economic activity and price forecasts are met, while monetary conditions were described as still accommodative after past hikes. Some members said rates could stay unchanged for now due to uncertainty linked to Middle East developments. Future decisions were linked to the Middle East situation, plus trends in wages, inflation, and financial conditions, with closer checks on wage and price rises from the next meeting.

Policy Path And Inflation Risks

Members said the Bank expects to adjust the level of monetary support without long gaps. They also said policy should avoid a situation where underlying inflation stays above 2%, and that the policy rate remains far from a neutral level. One member said the Bank should raise the policy rate without hesitation if there is no clear deterioration in the economic environment. Another said falling behind the curve could force rapid monetary tightening and lead to a large shock to the economy. Members discussed risks from high crude oil prices, which could cause stagnation alongside price rises. They said temporary inflation may call for waiting, but tightening may be needed if cost pressures grow due to an overly weak yen or stronger second-round effects. A Ministry of Finance representative said the BoJ should work with the government and assess the economic impact of the Middle East conflict. USD/JPY was 160.20, down from 160.46, described as a 20-month high.

Market Implications For Rates And Yen

The prevailing opinion from the Bank of Japan signals a clear intention to continue raising interest rates. We see members stressing the need to act without long intervals to avoid falling behind the curve. This hawkish tilt suggests that the next rate hike could come sooner than previously expected. This stance is supported by recent data showing Japan’s core-core CPI for February 2026 came in at 2.4%, remaining stubbornly above the 2% target. Looking back at 2025, we recall the Shunto wage negotiations resulted in an average increase of over 4%, providing the foundation for demand-driven inflation. These factors give policymakers the justification they need to tighten monetary conditions further. For derivative traders, this outlook points to rising volatility in Japanese yen pairs. Implied volatility on USD/JPY options will likely increase, making strategies like long straddles or strangles worth considering ahead of the next BoJ meeting. The risk is now skewed toward yen strength, making JPY call options a viable way to position for a surprise hike. The expectation of future rate hikes should continue to put upward pressure on Japanese government bond (JGB) yields. We believe shorting JGB futures is a direct way to trade this view. This is especially relevant since we moved past the era of Yield Curve Control back in 2024, allowing market forces to have a greater impact on rates. However, a note of caution is warranted due to geopolitical uncertainty and energy prices. With Brent crude currently trading around $92 a barrel, some members are clearly concerned about cost-push inflation leading to economic stagnation. This internal debate is the primary source of uncertainty and could delay the next policy move. At a USD/JPY level of 160.20, the risk of direct currency intervention from the Ministry of Finance is extremely high. We saw how they acted decisively back in 2024 when the yen weakened past similar levels. Therefore, traders must be cautious with large short yen positions, as a sudden intervention could trigger a sharp, multi-yen reversal in the currency. Create your live VT Markets account and start trading now.

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