The International Energy Agency said its 32 member countries unanimously agreed to make 400 million barrels of oil from emergency reserves available to the market. It described this as the largest coordinated release of strategic oil reserves to date. The IEA said the release would take place over a period tailored to each country’s national circumstances. It also said it will continue to monitor global oil and gas market developments. The agency stated that the Middle East conflict is affecting global energy markets. It added that Asia is the region most affected by disruptions in gas supply. The announcement followed earlier indications from some governments about releasing reserves. Japan said it could start releasing oil reserves as early as 16 March, and Germany also indicated it would release part of its reserves. West Texas Intermediate US oil traded around $85.30 on Wednesday. Since the start of the European session, it moved between $82 and $88 with no clear direction. With the largest-ever coordinated reserve release announced, the initial reaction should be to prepare for downward price pressure on crude. This 400 million barrel figure is a significant supply shock, making bearish positions like buying put options on WTI or selling front-month futures contracts a primary consideration. The market’s current stability around $85 suggests it may be underestimating the full impact of this supply hitting the market over the coming weeks. However, we must remember the precedent set back in 2022 when a large strategic release was announced to counter the effects of the Ukraine conflict. While prices dipped initially, the underlying geopolitical tensions and strong demand caused them to rebound within months. That release provided only a temporary cap on prices, not a long-term solution, a pattern that could easily repeat itself now. Recent data reinforces the idea that underlying fundamentals remain strong, potentially limiting the downside. The latest Energy Information Administration (EIA) report showed global oil demand for 2026 was just revised upwards by 1.9 million barrels per day, citing robust consumption in Asia. Furthermore, last week’s U.S. commercial crude inventories saw a surprise draw of 2.1 million barrels, indicating the market is already tight even before accounting for the conflict’s disruptions. This creates a high-uncertainty environment, which points directly to a spike in volatility. The CBOE Crude Oil Volatility Index (OVX) is currently trading near 42, a relatively elevated level that signals trader nervousness. This suggests that strategies that profit from large price swings, such as long straddles or strangles, could be effective whether the price breaks below $80 or rallies past $90. Given the release will be staggered over time, a time-based strategy using calendar spreads is also attractive. We could see near-term contracts, like for May delivery, weaken significantly while longer-dated contracts for September or December remain stronger. A trader might consider buying December 2026 call options while selling May 2026 calls to capitalize on this expected curve flattening.

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February US CPI met forecasts, with core inflation easing and supercore cooling after January’s tariff-related rise. CPI supercore slowed from 0.59% month on month to 0.35% in February. TD Securities projects PCE supercore at 0.28% for February and core PCE at 0.31% month on month. The note says tariff pass-through appears to have moderated versus January.

Inflation Outlook

The report expects an oil-driven rise in energy prices to feed into near-term inflation data. It forecasts March CPI will show higher energy prices, pushing year-on-year inflation towards 3%. Energy inflation was linked to higher petrol prices, with an expectation of a further rise in March after oil prices jumped during the Iran conflict. The Federal Reserve is expected to remain patient while Middle East developments remain uncertain. US 10-year Treasury yields are expected to stay rangebound until the second half of the year. The projected range for 10-year yields is 4.0–4.3%, after a brief move above the range ahead of strikes in Iran. We recall that the moderation in supercore inflation back in February 2025 was a temporary signal. As we expected, the oil shock stemming from the Iran conflict that spring did indeed push headline inflation higher throughout last year. That persistence is now clear, as the latest Bureau of Labor Statistics data for February 2026 shows headline CPI remains elevated at 3.2% year-over-year.

Rates Strategy

The Federal Reserve’s patience, which we anticipated through the second half of 2025, is now clearly exhausted. Recent speeches from Fed governors have signaled a more hawkish stance, effectively taking rate cuts off the table for the first half of this year. This is a significant shift from the more neutral position the market had priced in just a few months ago. Consequently, the 4.0-4.3% range in 10-year Treasury yields that defined much of last year’s trading is no longer the ceiling. With the 10-year note currently yielding around 4.45%, the strategy of buying dips has become risky. Traders should now consider positioning for higher rates, possibly using options on Treasury futures to protect against further yield increases. The view from 2025 that real rates would outperform nominals proved to be correct, and this trend should continue. Concerns about persistent inflation make derivatives tied to Treasury Inflation-Protected Securities (TIPS) attractive. Volatility in the rates market is picking up, suggesting that straddles or strangles on interest rate futures could be effective for capturing bigger moves. Energy remains the primary driver we identified a year ago. WTI crude prices, which spiked to over $90 a barrel during the 2025 conflict, have stabilized but remain stubbornly high, trading this week near $85 a barrel. This continues to feed into inflation, meaning call options on major energy ETFs or futures contracts are warranted to position for sustained price pressure. Create your live VT Markets account and start trading now.

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US EIA data for 6 March showed a rise in crude oil stocks. The change was above the forecast of 1.1M. The actual increase was 3.824M. This was 2.724M higher than expected.

Inventory Surprise And Price Pressure

The crude oil inventory build of 3.824 million barrels is significantly higher than the 1.1 million barrel forecast, signaling a bearish sentiment for oil prices in the immediate term. We see this as putting direct downward pressure on front-month WTI and Brent futures contracts. This surprise build suggests that either demand is weaker than we thought or supply is more robust. Looking deeper, this inventory increase aligns with other recent data points we’ve been tracking. U.S. crude production has been holding strong near a record 13.2 million barrels per day, while refinery utilization is hovering at a modest 86% as we are in the midst of spring maintenance season. This combination of high output and lower processing capacity naturally leads to more barrels going into storage. On the demand side, the picture is also softening, giving us more reason for a cautious outlook. Recent figures show that gasoline supplied, a proxy for demand, is tracking roughly 2% lower than at this same point in March of 2025. This points to potential economic sluggishness or changing consumer habits that are weakening consumption. For derivative traders, this environment favors strategies that profit from falling or stagnant prices. We believe selling out-of-the-money call spreads on May or June contracts could be an effective way to collect premium while capping risk. The oversupply is also likely to strengthen the market’s contango, making calendar spread trades—selling the front-month contract and buying a longer-dated one—increasingly attractive. This situation confirms the demand concerns that were beginning to build toward the end of 2025. While much of the volatility we saw in previous years was driven by geopolitical supply risks, the narrative now is clearly shifting. The market’s focus for the coming weeks will be firmly on this oversupply picture.

Near Term Market Focus

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Nifty fell about 400 points after failing to move above the 24,300 level. Price then moved down towards 23,900. A video reviews an earlier Elliott Wave plan shared on WaveTalks that marked 24,300 as a possible reversal area. The drop is presented as matching the earlier outlined price structure.

Nifty Rejects Key Resistance

We’ve seen the Nifty react precisely from the 24,300 resistance zone, confirming the weakness we anticipated. With the index now trading below 23,900, traders should focus on capital protection. The quick 400-point slide suggests that sellers are currently in control. This sharp move has caused a spike in volatility, with the India VIX jumping from below 13 to over 15.5 in just a few trading sessions. This means option premiums, particularly for puts, are becoming more expensive. Traders should account for this higher cost when initiating new positions. We are also seeing a clear shift in institutional flows that supports this cautious outlook. Foreign Institutional Investors (FIIs) have been net sellers for five consecutive sessions, offloading over ₹12,000 crore this month. While domestic institutions are providing some support, the sustained foreign selling is a significant headwind. This price action is reminiscent of the consolidation we witnessed in the second quarter of 2025 after a strong rally. That period also saw a sharp, swift correction of nearly 5% before the market found a stable base. A similar defensive posture could be warranted now.

Levels To Watch Next

Given the breakdown, traders could consider strategies that benefit from range-bound action or further downside, with 23,500 acting as the next major support level. As we approach the March series expiry, expect volatility to remain elevated. Pay close attention to how the index behaves around these key psychological levels. Create your live VT Markets account and start trading now.

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WTI has fallen back from a spike near $120 but remains supported by reduced Gulf output and limited ability to reroute supplies. Rabobank expects supply conditions to ease over time as flows gradually return. About 14 million b/d of supply is estimated to be stranded since the closure of Hormuz. Of this, around 5m b/d of Saudi supply could shift to Yanbu on the Red Sea, and about 1.5m b/d of UAE supply could bypass the Strait and load at Fujairah.

Strategic Reserve Releases

G-7 countries plus China may release crude from their strategic petroleum reserves to reduce the impact. These releases are expected to cushion some disruption, but not fully cover a prolonged outage. Rabobank forecasts WTI averages of $83/bbl in Q2 2026, $80/bbl in Q3 2026, and $78/bbl in Q4 2026. It projects $72/bbl for 2027. With WTI crude pulling back from its recent spike near $120, the market is digesting the ongoing supply shock. We see that roughly 7.5 million barrels per day remain stranded even after accounting for rerouting efforts from Saudi Arabia and the UAE. This fundamental tightness provides a strong floor for prices in the near term. The G7 nations and China have now confirmed a coordinated release of 100 million barrels from strategic reserves over the next three months. This action is capping the upside and has pulled the front-month contract back towards the mid-$80s, but it is only a temporary cushion against a prolonged outage. We view this release as a source of short-term supply that will not alter the medium-term bullish structure.

Options And Curve Positioning

Implied volatility remains extremely high, with the OVX index trading near 45 after peaking above 70 during the initial panic. This is more than double the levels we saw for most of 2025. This elevated premium makes selling options attractive for those who believe the worst of the price spike is over. The market is in steep backwardation, with near-term contracts priced significantly higher than those for late 2026 and beyond. We see an opportunity in calendar spreads to profit from this structure as the announced SPR barrels hit the spot market. This should pressure the front of the curve more than deferred contracts. Given the projection for a gradual decline to $80 by the third quarter, traders should consider establishing bearish positions that have limited risk. Buying put spreads, such as purchasing the June $80 put while selling the June $75 put, offers a defined-risk way to position for this expected slow grind lower. This is a more cautious approach than outright shorting in such a volatile environment. Looking back, this situation is more severe than the 2019 attacks on Saudi facilities, but the market reaction follows a similar pattern of an initial overreaction followed by a gradual normalization. History suggests that while the geopolitical risk premium will persist, the panic-driven spike is unlikely to hold. We expect prices to methodically ease toward the $83 per barrel average forecast for the second quarter. Create your live VT Markets account and start trading now.

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US President Donald Trump said in a brief phone call with Axios on Wednesday that the war with Iran will end soon. He said there is “practically nothing left” to target in Iran. Trump also said the war would end “any time I want it to end, it will end”. The report notes a correction made on March 11 at 14:30 GMT to fix the spelling of Axios.

Oil Market Implications

Looking back at the statements from March of 2025, the immediate signal was a collapse in the war risk premium for crude oil. We saw Brent crude fall over 25% in the following month, from its highs near $112, as supply fears from the Strait of Hormuz vanished. Now, with recent OPEC+ cuts holding firm and Chinese import data for February 2026 showing a 5% year-over-year increase, traders should consider call options to play a fundamentals-driven recovery. A year ago, these comments were a clear signal to short volatility. The VIX index, which measures market fear, dropped from the high 20s to below 15 within weeks as uncertainty was removed. With the VIX currently trading at a historically low 14.2, buying cheap, out-of-the-money call options is a prudent hedge against any surprises in the upcoming inflation data release. For defense sector equities, the end of active conflict signaled a peak for short-term trading. Stocks like RTX and LMT saw a significant pullback through the second quarter of 2025 after a sharp run-up. However, with the Pentagon budget for fiscal year 2027 recently approved with a 4% increase in procurement, long-term bullish positions could now be warranted using long-dated call options. The de-escalation was also a clear risk-on signal for the broader market. We saw the S&P 500 rally nearly 8% in the two months that followed the March 2025 announcement as geopolitical risk was priced out. Today, the focus has shifted entirely to central bank policy, so derivative plays should be centered on interest rate-sensitive sectors ahead of the next FOMC meeting.

Portfolio Positioning Considerations

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ABN AMRO economists say higher oil and gas prices linked to the Iran conflict would weigh more on Eurozone growth than on US growth. They attribute this to weaker real incomes and confidence in the Eurozone. They add that the Eurozone is more exposed because it is a net energy importer, so it does not gain the same extra activity from higher oil and gas prices as the US. They do not expect a repeat of the last energy crisis, when the economy stagnated for 5 quarters, even in a worse outcome.

Eurozone Inflation Risk In Focus

They state that inflation risks are higher than growth risks, especially if the shock persists. In milder outcomes, they expect inflation to rise briefly, with limited second-round effects. They expect the ECB to ignore a short-lived rise in energy inflation in the more favourable outcome. In a middle outcome, they expect one “insurance” rate rise, likely at the 30 April meeting. In a worse outcome, they expect this to be followed by another two rate rises to guard against spillovers to the labour market. The article notes it was produced with an AI tool and reviewed by an editor. Looking back at the energy shock of 2025, we saw how quickly an unexpected conflict could drive European Central Bank policy. The tensions with Iran at that time pushed Brent crude oil over $110 a barrel, which led the ECB to deliver a surprise “insurance” rate hike in its April 2025 meeting. That event provides a clear playbook for what could happen now.

Market Implications For ECB Policy

The situation today is becoming similar, with recent instability in the Strait of Hormuz pushing oil prices up 15% in the last two months to nearly $98 a barrel. The Eurozone remains a net energy importer, with the latest Eurostat data showing energy still accounts for over 60% of our total import bill. This structure makes our economy far more sensitive to an energy price spike than the United States, which is a net energy exporter. This time, the risk of second-round inflation effects is higher because core inflation has remained sticky at 2.7%, well above the ECB’s target. We should not expect the central bank to simply “look through” this energy shock as it might have in the past. The primary concern will be preventing higher energy costs from spilling over into wage demands and broader service price increases. For derivative traders, this means the market is likely underpricing the odds of a hawkish ECB pivot. Interest rate swaps are pricing in a steady policy rate through the summer, creating an opportunity to bet on a surprise hike. Options on EURIBOR futures that would profit from a rate increase in the second quarter appear cheap given the historical precedent and current inflationary pressures. This outlook also has significant implications for the euro. An unexpected rate hike, or even the possibility of one, would likely cause the euro to strengthen considerably against currencies with more dovish central banks. We should consider long positions in EUR/USD or EUR/JPY, possibly using call options to limit downside risk while capturing the potential for a sharp upward move. Create your live VT Markets account and start trading now.

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OPEC kept its forecasts for global oil demand growth in 2026 and 2027 unchanged, according to a draft report seen by Reuters. The group said geopolitical developments need close monitoring, but said it was too early to judge their effect on global economic growth projections. The report said OPEC+ crude output averaged 42.72 million barrels per day in February. That was up 445,000 barrels per day from January.

Supply Growth Adds Pressure

Saudi Arabia reported oil supply to the market of 10.111 million barrels per day in February. It also reported production of 10.882 million barrels per day. Japan said it plans to start releasing part of its strategic oil reserves as early as 16 March, before a formal recommendation from the IEA. Germany also said it would release part of its strategic reserves. Reuters reported the IEA is expected to issue a recommendation on a possible strategic oil reserve release later in the day. WTI was volatile, trading between $82 and $88 during the European session on Wednesday. Given the steady demand forecasts from OPEC contrasted with rising supply, the immediate upside for WTI crude oil appears limited. The increase in OPEC+ output, combined with strong Saudi Arabian production, is creating significant headwinds for prices. This suggests that bullish strategies, such as buying naked call options, carry a high degree of risk in the coming weeks. The planned release of strategic reserves by major economies like Japan and Germany will add further barrels to an already well-supplied market. Recent data from the Energy Information Administration reinforces this, showing a surprise build in U.S. crude inventories of 2.1 million barrels last week, against expectations of a draw. For traders, this builds a strong case for a price ceiling, making strategies that profit from range-bound or slightly bearish price action, like selling covered calls against existing long positions, more appealing.

Options Strategies Favor Range Trading

We see WTI struggling for direction within an $82 to $88 range, which indicates a market in equilibrium, digesting these conflicting signals. This level of volatility suggests that option selling strategies designed to profit from time decay, known as theta, could be favorable if this sideways movement persists. This is a very different trading environment than the clear upward trend we observed in the second half of 2025. While the demand outlook is stable for now, we must view it in the context of a global economy that is still moderating, with the latest IMF forecast projecting global GDP growth at 2.9% for 2026. Inflation in the United States also remains a concern, coming in at 3.1% in the last reading, which could eventually dampen consumer spending on fuel if it remains elevated. Any sign of weakening economic data could quickly shift sentiment, putting downward pressure on crude prices and rewarding traders positioned for such a move. Create your live VT Markets account and start trading now.

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EUR/GBP has fallen about 1.5% since the Iran conflict began. The decline has been linked to a stronger GBP rate profile and resilient equity markets. The drop has also been associated with a hawkish repricing in UK rates. Equity market strength has reduced demand to switch from higher beta GBP to lower beta EUR.

Short Term Valuation Measures

Short-term valuation measures suggest the move may be stretched. Oil prices have slipped back below $90. Lower oil could lead to a more dovish reassessment of UK rate expectations. This may support a corrective rise in EUR/GBP towards 0.870 rather than a further move down to 0.860. The piece was produced using an AI tool and reviewed by an editor. FXStreet’s Insights Team selects market observations from external experts and adds input from internal and external analysts. Looking back to the spring of 2024, we saw EUR/GBP weaken significantly amid the tensions in the Middle East, falling roughly 1.5%. This move was largely driven by a more aggressive Bank of England rate profile compared to the European Central Bank, which proceeded with a rate cut in June 2024 while the BoE held firm at 5.25%. The resilience in equity markets at the time also favored the higher-yielding pound over the euro.

Risk Managed Upside Approaches

At that point, with oil prices retreating below $90 a barrel, there was a view that the pair was oversold and due for a corrective bounce toward 0.870. However, that substantial correction failed to materialize throughout 2024 as fundamental policy divergence remained the dominant theme. The cross-rate instead continued to grind lower, even breaking below the 0.8400 level later that year. Given this history, derivative traders should be wary of positioning for a simple snap-back rally in the coming weeks. The key lesson from the past two years is that central bank policy divergence is the primary driver for this pair, often overpowering short-term technical signals. We believe that buying options to protect against further downside, such as purchasing puts, is a more prudent strategy than betting on a sustained rebound. For those still anticipating some upside, a bullish call spread could be a disciplined approach to consider. This would cap potential profits but significantly lower the initial premium paid, a valuable lesson for a pair that has consistently failed to sustain major rallies. This strategy allows for participation in a modest recovery while managing risk in case the long-term downtrend reasserts itself. Create your live VT Markets account and start trading now.

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The Canadian Dollar traded flat against the US Dollar on Wednesday in North America, with USD/CAD continuing a consolidation. Narrowing interest rate differentials and higher oil prices were cited as factors supporting further CAD strength, and Scotiabank’s fair value estimate for USD/CAD was put at 1.3483. Short-term correlation work pointed to a stronger link between USD/CAD and rate spreads, based on expectations for Federal Reserve easing and Bank of Canada tightening. Markets were pricing 12bps of tightening for September and an 80% chance of a hike by December.

Technical Outlook And Key Levels

Technical indicators were described as bearish, with the RSI in the upper 30s and price action suggesting a retest of the January low near 1.3480. Resistance was noted around the 50-day moving average at 1.3702, and the near-term trading range was placed between 1.3500 and 1.3600. Domestic data risk was described as limited ahead of Thursday’s trade figures and Friday’s employment report. The article stated it was produced using an AI tool and reviewed by an editor. Last year, we saw a bearish setup for USD/CAD based on narrowing interest rate differentials and rising oil prices. The market was pricing in Fed easing alongside Bank of Canada tightening, which pushed our fair value estimates lower. This fundamentally supported a range between 1.3500 and 1.3600. The situation has now inverted as of March 2026. The U.S. Federal Reserve is holding rates firm at 4.75% amid sticky inflation data, while recent soft Canadian GDP figures have shifted the Bank of Canada’s outlook toward potential cuts from its current 5.00% rate. This has caused the interest rate spread to widen again in favor of the U.S. dollar.

Options Positioning For A Stronger Usd

Adding to this shift, oil is no longer the tailwind for the Canadian dollar that it was in 2025. WTI crude prices have softened, now trading around $78 per barrel, as global demand forecasts have been trimmed. This removes a key pillar of support for the CAD that was present in the previous analysis. Given this reversal, we believe derivative traders should consider bullish strategies for USD/CAD. With the pair currently trading near 1.3850, purchasing call options with strike prices around 1.3900 or 1.4000 could capture further upside momentum. This strategy benefits from the renewed strength in the U.S. dollar. For a more defined-risk approach, a bull call spread would be appropriate. One could buy a 1.3900 strike call and sell a 1.4050 strike call to finance the position. This reflects a view that the pair will continue to grind higher in the coming weeks, driven by diverging central bank policies. Create your live VT Markets account and start trading now.

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