US stock indices opened about 1% lower on Monday as oil rose more than 9% from Friday’s close, with the Strait of Hormuz still closed. In the first half hour, the DJIA, Nasdaq Composite and S&P 500 fell between 1.3% and 1.6%. Saudi Arabia said it would cut production at two oil fields, while also tendering about 4 million barrels of crude through its Red Sea pipeline. Crude futures hit $119.48 overnight, the highest since June 2022, then fell below $100 a barrel after a Financial Times report on possible G7 reserve releases.

Volatility Driven Oil Options

Hims & Hers Health rose about 40% after reaching a legal deal with Novo Nordisk over GLP-1 weight loss drugs. Consumer discretionary fell 2.5%, while energy was up 0.2%. TS Lombard said higher oil prices could add two percentage points to global inflation, which may reduce the chance of interest rate cuts. The Strait of Hormuz carries about one-fifth of global oil supply; oil reference points include $130.50 (March 2022) and $147.27 (July 2008). Year to date, the Nasdaq Composite is now lagging the S&P 500 and Dow. With oil surging overnight, volatility is now the most important factor for us to trade. The wild swing from a high of $119 down below $100 shows that two-way risk is extremely high, making directional bets on futures risky. We should be looking at buying options straddles or strangles on crude oil, which profit from large price moves in either direction, as the Strait of Hormuz situation could escalate or be resolved unexpectedly.

Index Protection With Puts

The immediate drop in the S&P 500 and NASDAQ is a clear signal of fear, and we need to position for a potential deepening of this short-term downtrend. Buying put options on major index ETFs like the SPY or QQQ is a direct way to hedge our long portfolios or speculate on further weakness. Historically, geopolitical shocks cause the VIX, the market’s main fear index, to spike; for instance, it more than doubled in early 2020 and jumped over 75% in a few weeks during the 2022 invasion of Ukraine, showing how quickly fear can take over. We are seeing a classic sector rotation, with energy gaining while consumer discretionary stocks get hit the hardest. This presents a clear pairs trade opportunity using options on sector ETFs. We should consider buying calls on the Energy Select Sector SPDR Fund (XLE) to ride the tailwind of higher oil prices while simultaneously buying puts on the Consumer Discretionary SPDR Fund (XLY), as sustained high gas prices will almost certainly hurt consumer spending. The threat of rising global inflation will put central banks in a difficult position, making interest rate cuts highly unlikely in the near term. This means bond prices could fall as yields rise to reflect the new inflation risk. We can express this view by buying put options on long-duration Treasury bond ETFs, a strategy that would have been very profitable during the 2022-2023 period when the Federal Reserve was aggressively hiking rates to fight inflation. Even with the broad market selling off, the 40% spike in Hims & Hers Health stock shows that company-specific news remains a powerful driver. This reminds us that we should still look for unique opportunities in single-stock options that are not tied to the geopolitical conflict. The implied volatility on names with major catalysts can offer chances to profit that are completely separate from the movements in oil or the major indices. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account

The Japanese yen has not risen after the latest jump in market volatility, with the Bank of Japan’s trade-weighted JPY index still near year-to-date lows. In earlier volatility surges, the yen strengthened twice, in summer 2024 and in April 2025. In 2022, during an energy price shock, the yen was among the worst-performing G10 currencies, alongside the Swedish krona. Japan faced a negative terms-of-trade shock while the Bank of Japan kept rates unchanged, as the US Federal Reserve and other major central banks raised rates from near zero.

Policy Gap And Carry Trade Build

This widening policy gap supported the build-up of yen-funded carry trades. The trade-weighted yen has fallen by about 23% since the 2022 energy shock, with more than half of that decline occurring after volatility peaked in April 2025, when Trump announced Liberation Day tariffs. A rise in risk aversion linked to the Middle East conflict could lead to a reversal in these carry trades. Such a squeeze could drive a counter-trend yen rebound. The Japanese yen has not strengthened despite the recent spike in market volatility, with its trade-weighted index staying near its lows for the year. Net short JPY positions among speculative traders recently hit a multi-year high, reaching over $15 billion according to the latest CFTC data. This indicates a very crowded trade betting against the yen, even as market fear gauges rise. We remember how the yen rallied sharply on the last two occasions when FX volatility spiked, first in April of last year and again during the summer of 2024. In that April 2025 episode, for instance, the USD/JPY pair fell by nearly 5% in under a week as traders rushed to close out their carry positions. History suggests that when risk aversion truly takes hold, the yen tends to benefit as a safe-haven currency.

Positioning And Hedge Ideas

This vulnerability began after the 2022 energy shock, when the Bank of Japan kept interest rates low while other central banks hiked aggressively. This wide interest rate differential, which still sits above 450 basis points with the US, encouraged traders to borrow cheaply in yen to invest in higher-yielding currencies. This massive build-up of JPY-funded carry trades has contributed to the yen’s 23% decline since that time. The primary risk now is a violent reversal if the current geopolitical shock intensifies, triggering a squeeze on those crowded positions. Derivative traders should therefore consider purchasing out-of-the-money JPY calls or USD/JPY puts. These options provide a low-cost way to position for a sudden and powerful counter-trend rally in the yen, protecting against a sharp unwinding of the carry trade. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account

GBP/JPY rose for a third day on Monday and traded near 211.70. Movement has been driven by changing BoE and BoJ rate expectations, with limited fresh UK or Japan data. Before the Iran conflict escalated, markets priced about an 80% chance of a BoE rate cut at the 19 March meeting and another cut later in the year. Money markets now price about a 50% chance of a BoE rate hike by year end, according to Bloomberg.

BoE And BoJ Expectations

The Yen stayed weaker as markets expect the BoJ to tighten policy slowly, with higher energy costs a risk for Japan’s growth. BoJ Governor Kazuo Ueda said rates will rise if forecasts are met, while monitoring Middle East effects. Japan’s government is weighing steps funded by emergency reserves to limit petrol price rises. Japan also told a national oil reserve site to prepare for a possible crude release, Nikkei reported. Japan’s Labour Cash Earnings rose 3% year on year in January, up from 2.4% in December. The Current Account surplus was ¥941.6 billion versus ¥960 billion expected, down from ¥7,288 billion. Japan’s Q4 GDP (QoQ) is due Tuesday and PPI on Wednesday. UK January GDP is due Friday, alongside industrial and manufacturing output and consumer inflation expectations.

Key Risks And Next Data

The sharp rise in GBP/JPY we saw in early 2025, driven by the US-Iran conflict’s effect on oil prices, has set the stage for the current environment. That conflict pushed Brent crude above $115 per barrel last year, forcing the Bank of England to pivot away from expected cuts and instead deliver two rate hikes, bringing the Bank Rate to 5.75%. As of today, with GBP/JPY trading near 218.50, the key question is whether that policy divergence can continue to drive the pair higher. Looking at the Pound, recent data suggests the inflationary pressures from last year’s energy shock are finally easing. The latest CPI figures for February 2026 showed inflation falling to 3.5%, down significantly from its 2025 peak but still well above the 2% target. This puts the Bank of England in a holding pattern, making further rate hikes unlikely but keeping immediate rate cuts off the table, which suggests volatility in the Pound could decline. Meanwhile, the situation in Japan is shifting, creating a potential risk for those holding long GBP/JPY positions. After a long delay due to last year’s global uncertainty, the Bank of Japan finally raised its policy rate to 0.10% in late 2025. More importantly, preliminary results from this year’s “Shunto” wage negotiations are showing average pay increases of around 4.1%, a multi-decade high that adds significant pressure on the BoJ to normalize policy further. Given these dynamics, the one-way upward trend in GBP/JPY may be maturing. Derivative traders should consider protecting profits on long positions, perhaps by purchasing put options to hedge against a potential reversal if the Bank of Japan signals a more hawkish stance. The wide interest rate differential that has fueled this trade for so long is now more likely to narrow than to widen further. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account

Eaton Corporation (ETN) rose to near $410 in late January, then fell by about $90 over the following weeks. The price later recovered to about $347. An ascending support line from the April 2024 low near $235 has connected key swing lows since early 2024. In late January, ETN moved below this line intraday, reached the $315–$320 area, then rebounded, while holding the line on a closing basis. The $340 level has acted as both support and resistance in the second half of 2024, and ETN is now just above it. A daily close above $340 supports the recent rebound, while a confirmed daily close below $340 would indicate weakening support. If support holds, price targets mentioned are $370–$380 first, with the January area near $410 as a further level. If a daily close falls below $340, the next area referenced is a retest of $315–$320, and a break below that would question the longer-term uptrend structure. We saw that test of the long-term trendline in early 2025 as a critical moment when the stock was trading around $347. That support near the $340 level we were watching held firm on a closing basis. This successful defense proved to be the launching pad for the next major leg up over the past year. The move from that 2025 base successfully pushed through our initial $370 target and eventually reclaimed the prior highs near $410 later that year. Today, with ETN trading near $495, the uptrend is supported by strong fundamentals, including a recent February 2026 earnings report that beat analyst expectations with a 12% year-over-year revenue increase, driven by electrification and data center demand. This continued strength shows the market is rewarding the company’s performance. For derivative traders now, the established uptrend makes selling out-of-the-money puts an attractive strategy for the coming weeks. With the stock in a steady climb, implied volatility is relatively low, and we can collect premium by selling April 2026 puts with a strike price around $470. This trade profits if ETN simply stays above that level, benefiting from both time decay and the stock’s upward momentum. Alternatively, traders wanting to position for a move toward $520 can use bull call spreads to limit costs. One could buy a May 2026 $500 strike call and sell the May 2026 $520 strike call against it. This defines the risk and provides a leveraged bet on continued, steady gains without paying the full premium for an outright call purchase. The key level to watch now is the $475 area, which has acted as support following the post-earnings surge. A daily close below this level would signal a potential loss of short-term momentum and would be our cue to reassess bullish positions. Until then, the path of least resistance appears to remain higher.

Start trading now – Click here to create your real VT Markets account

Amazon reached a pre-market gap-fill level near $208, and this price has already been touched. With the level tested, the probability of a bounce there is described as lower than before. The text explains that gap fills may be less effective after the price reaches them and does not reverse straight away. As the move occurred in pre-market trading, a rise during regular hours is still presented as possible, and dollar-cost averaging is mentioned as an option. If selling pressure continues during the session and the price moves below $208, attention shifts to about $201. This level is linked to another gap fill and is presented as the next support area. A further gap fill is placed around $193, roughly $9 below $201. This is described as about 4% lower than $201 and is framed as a deeper support if the price drops through $201 and the decline continues. We see that the pre-market test of the $208 gap fill has likely absorbed much of the initial buying interest at that level. Given the recent market chop following the February inflation data that came in slightly hotter than expected at 2.9%, we are cautious about buying calls for a bounce right here. Any move up from this already-tested zone may lack the strength for a significant reversal. If the stock continues to sell off intraday and approaches the $201 gap fill, we view this as a better opportunity to sell cash-secured puts with expirations in late March or early April. Implied volatility has risen to 35% on this downturn, making the premiums on these options more attractive. This strategy allows us to collect income if the stock finds support, or to potentially own shares at a more solid technical level. For those anticipating further weakness, a clean break below $201 would be our signal to consider buying puts. After the tech sector’s strong performance in the latter half of 2025, a deeper correction is certainly possible. Targeting puts with a strike around $195 could prove effective for playing a move down to the next major support. The gap fill around $193 represents a high-conviction level where we would become more aggressive with bullish strategies. If the price reaches this zone, we will look to establish bull put spreads, such as selling the $195 put and buying the $190 put for protection. This defined-risk trade is ideal for capturing a bounce from what we see as a much stronger area of historical demand.

Start trading now – Click here to create your real VT Markets account

HSBC Asset Management says recent geopolitical tensions have pushed oil prices higher and increased market volatility. It sets out two scenarios: a brief shock that leaves current growth and profit expectations intact, and a longer spike above USD100 that could weaken growth, profits, and equity valuations. The report says the effect depends on the size, speed, and length of the move, and that outcomes differ by country. In the first case, geopolitical risk fades and global supply stays high, so the disruption is temporary and the base case can continue.

Oil Shock Scenarios And Market Impact

It adds that growth could be supported by policy support, broadening profits, and an AI capital spending boom. In the second case, a persistent rise of more than USD20, or oil above USD100 as last seen in 2022, could be more damaging to growth and could reduce profits and market valuation multiples. HSBC also models a persistent USD10 oil shock, finding developed economies would see broadly similar effects on growth and inflation. It says emerging markets would see more varied outcomes, while some US assets are “priced for perfection” and other regions have valuation gaps that may offer some cushion. With WTI crude climbing to $92 a barrel this week amid renewed tensions in the Strait of Hormuz, we are now facing the two distinct oil shock scenarios that were concerns last year. The key question for the coming weeks is whether this is a transitory event or the beginning of a persistent move toward $100. Our response must be prepared for either path, as the implications for the broader market are significant. If we believe this geopolitical risk will fade and supply will remain robust, then options strategies that bet on a price decline are attractive. This could involve selling call spreads on crude futures with strike prices in the high $90s, aiming to profit as prices revert to the mid-$80s range. This outlook assumes the supportive policies and strong corporate profits we saw through 2025 can absorb this brief disruption.

Positioning And Hedging Approaches

However, if this spike is more durable, we must consider the risk to economic growth. We remember the demand destruction and market turmoil when oil shot above $100 back in 2022. With February’s CPI data showing core inflation still running at a stubborn 3.1%, a sustained oil shock would severely limit the central bank’s ability to support the economy. In that more damaging scenario, protective puts on major indices like the S&P 500 become critical. The US market is particularly vulnerable, with the S&P 500’s forward P/E ratio sitting near 22x, suggesting it is priced for perfection. Hedging this risk through options is prudent, as a growth scare could quickly challenge such high valuations. Looking back, our analysis in 2025 highlighted the valuation gap between US markets and other regions, which now offers a trading opportunity. The MSCI Emerging Markets Index trades at a much lower 13x forward earnings, providing a relative cushion. A pairs trade using options to favor emerging market ETFs over expensive US indices could perform well if high energy prices begin to drag on global growth. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account

EUR/JPY traded near 183.20 on Monday, up 0.35%, as the Yen weakened against the Euro. The move came despite Middle East tensions that often support safe-haven currencies. The conflict involving the US, Israel and Iran entered its tenth day. Iran appointed Mojtaba Khamenei as Supreme Leader after Ayatollah Ali Khamenei was killed in initial US-Israeli strikes, while President Donald Trump called for Iran’s “unconditional surrender”.

Bank Of Japan Rate Path

Higher geopolitical risk can lift demand for the Yen, but the effect has been limited. One factor is uncertainty over the Bank of Japan’s interest rate path. BoJ Governor Kazuo Ueda said rates may stay unchanged for longer due to the war and higher Oil prices. Some had expected a March hike, but Reuters reports many economists now see any move delayed until at least June or July. In the Eurozone, the Sentix Investor Confidence Index fell to -3.1 in March from 4.2 in February. Concerns include attacks on energy infrastructure and shipping disruption in the Persian Gulf, which have pushed Oil prices higher. German Industrial Production fell 0.5% month-on-month in January, and Factory Orders dropped 11.1% after a 6.4% rise. Markets are pricing in two ECB rate rises over one year, and attention turns to Japan’s revised Q4 GDP estimate due Tuesday.

Looking Back At March 2025

Looking back at the situation in March 2025, the market was driven by the Bank of Japan’s perceived delay in raising interest rates. The conflict in the Middle East was pushing oil prices up, which hurt the energy-importing Yen and made the BoJ hesitant to tighten policy. This created a clear upward path for EUR/JPY, which was trading around 183.20 at the time. As we saw through the rest of 2025, that initial analysis largely held, though with significant volatility. The BoJ did eventually raise its key policy rate in September 2025, but only by a cautious 15 basis points as Japan’s Q3 GDP revised downwards to just 0.2% growth. This delay meant that long-yen positions were unprofitable for most of the year. Meanwhile, the European Central Bank’s situation became more complicated, capping the Euro’s potential. The weak German industrial data from early 2025 foreshadowed a difficult year, and the ECB ultimately delivered only one 25-basis-point hike in July before pausing as Eurozone inflation, after peaking at 4.1%, started to recede by year-end. This shows that the two rate hikes priced in back then were overly optimistic. The sustained geopolitical risk premium kept WTI crude oil prices in a high range, averaging over $88 per barrel in the second half of 2025. This environment suggests derivative traders should be prepared for continued uncertainty and price swings driven by energy costs. Given this backdrop, buying straddles or strangles on EUR/JPY could be a strategy to profit from volatility, regardless of the direction. Currently, the interest rate differential between the ECB and BoJ has narrowed slightly, but the fundamental story remains. With the BoJ still moving at a glacial pace, any signs of economic weakness in Europe could quickly unwind the Euro’s strength against the Yen. Traders should watch upcoming Eurozone PMI data closely, as a poor reading could make selling EUR/JPY call options an attractive strategy to collect premium. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account

TD Securities said rising tensions linked to Iran and a spike in oil prices are bringing back the US Dollar’s safe-haven role. It said the United States is a relatively closed economy, energy independent, and geographically insulated. The note said this shock may let the Dollar act as a haven again, even if it has not been one in all recent episodes. It added that markets are expected to keep watching developments around Iran, with attention on energy markets.

Dollar Safe Haven Dynamics

TD Securities said the Federal Reserve can focus on inflation risks and stay on hold. It said other central banks face both weaker growth and higher inflation, which could widen interest-rate differentials in favour of the Dollar. The analysts said markets first “bull steepened” after a weaker US non-farm payrolls report. They said that move was later fully reversed as oil-price rises renewed inflation concerns, and that the Fed is likely to look past one weak labour report if inflation risks increase. We saw the US Dollar regain its safe-haven status last year during the flare-up of tensions in the Middle East. The spike in oil prices then reminded everyone that the US is largely energy independent, giving the dollar a unique advantage. Now, in March 2026, these same dynamics are shaping our trading strategies for the weeks ahead. The Federal Reserve has kept its key interest rate firm at 5.5%, focused squarely on inflation, which is a concern with oil prices remaining elevated near $98 a barrel. In contrast, the European Central Bank recently cut its rate to 3.75% to combat slowing growth, as manufacturing PMIs have struggled to stay above the 50 expansion line. This widening interest rate gap makes owning dollars more profitable, suggesting long USD positions against currencies like the euro are still the primary play.

Trading Strategy Implications

We should expect continued market nervousness, similar to how the VIX volatility index jumped from the mid-teens to over 22 during the peak uncertainty in late 2025. This environment is ideal for traders using options to manage risk or speculate on price swings in currency pairs like USD/JPY. Buying call options on the US Dollar Index (DXY), which has already climbed from around 104 to over 107 in the past six months, offers a way to profit from further dollar strength with limited downside. The ongoing geopolitical risk premium in energy markets continues to be a major factor. Traders should consider that any further escalation in the Middle East will likely push crude prices higher, reinforcing the Fed’s hawkish stance and further benefiting the dollar. This makes derivatives tied to currency pairs of major oil importers, such as the Japanese Yen (USD/JPY), particularly sensitive to news flow. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account

US non-farm payrolls fell by 92,000 in February, reversing January’s gain of 126,000. The report pointed to a weak underlying labour trend in the US. Several temporary factors affected February’s result, including bad winter weather, a health-care workers strike, and a drop after stronger hiring in January. Private employment growth has averaged 30,000 per month so far in 2026, compared with an average of 26,000 per month in Q4 2025.

Fed Policy In A Stagflation Backdrop

The Federal Reserve is facing weaker jobs data alongside an oil-driven rise in inflation. At the same time, markets have pushed back the expected timing and size of further US rate cuts, supporting higher US rates and a firmer US dollar. In Europe, markets have repriced more sharply. The euro-zone rate market is now pricing in almost 50 basis points of ECB rate hikes by year end, despite the euro-zone economy facing a larger negative energy price shock. The weak February jobs report, showing an unexpected loss of 92,000 jobs, complicates the Federal Reserve’s policy path considerably. We are now grappling with an oil-driven inflation shock at the same time the underlying US labor trend appears to be faltering. This stagflationary environment creates significant uncertainty for the direction of interest rates in the coming weeks. The recent spike in WTI crude to over $110 a barrel is directly feeding into inflation, which we saw accelerate to 4.1% in the last CPI report. This strong price pressure argues for the Fed to remain hawkish, yet the weak employment data suggests the economy may not withstand higher rates. This policy conflict is the central issue traders must navigate.

Rates Volatility And Key Market Signals

Given the Fed’s difficult position, we should anticipate heightened volatility in interest rate markets. Options on SOFR futures are becoming a key tool to trade this uncertainty, as implied volatility is rising ahead of the next FOMC meeting. Strategies like straddles, which profit from a large move in either direction, could be effective in this environment. We should also monitor the Treasury yield curve, particularly the spread between 2-year and 10-year notes. A Fed that is forced to keep rates high to fight inflation despite a slowing economy could drive the curve into a deeper inversion, much like we saw at points in 2025. This would signal a growing risk of a policy-induced recession. In currency markets, there is a notable divergence with Europe, where markets are pricing in almost 50 basis points of ECB rate hikes this year. This is happening despite recent data, such as Germany’s manufacturing PMI falling to 46.5, suggesting a greater economic hit from high energy prices there. This dynamic could lend surprising strength to the EUR/USD pair, making euro call options a viable play on this policy disconnect. The source of the problem, the energy shock, presents direct trading opportunities in oil derivatives. If we believe the weak US jobs report is a leading indicator of a broader global slowdown, then oil demand will eventually fall. In that case, buying long-dated put options on crude futures could act as an effective hedge or a speculative position for an economic downturn. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account

USD/JPY has moved back into Japan’s foreign exchange intervention area as global shocks and rising oil prices affect markets. USD/JPY could drop by three to five big figures if co-ordinated US–Japan intervention occurred, with short-dated volatility rising. Co-ordinated action is described as unlikely, and intervention is framed as less effective without signs of an imminent return of oil supply. Without an oil supply improvement, any move lower in USD/JPY is presented as hard to sustain.

Key Psychological Levels In Focus

Authorities are seen as monitoring psychological thresholds, including 160 in USD/JPY and 1500 in USD/KRW. These levels are linked to efforts to secure US dollar liquidity and the prospect of a large near-term increase in dollar supply. With USD/JPY now trading at 159.85, the pair has returned to the FX intervention zone we saw become critical in 2024. The recent surge in WTI crude oil prices to over $95 a barrel is a global shock putting upward pressure on the dollar. We see these factors as creating a tense environment where authorities are on high alert. We are now firmly in the territory where Japanese officials might act to supply dollars and strengthen the yen. Looking back from our perspective in 2025, we recall the multiple interventions in late 2024 when the pair pushed past 155 and approached these same levels. The Ministry of Finance has already increased its verbal warnings, stating it is watching currency moves with a “high sense of urgency.” For derivative traders, this means the risk of a sudden, sharp move has grown significantly, making short-dated volatility a key focus. One-month implied volatility on USD/JPY has already climbed over 12% in the last few weeks, but it could spike much higher on an actual intervention announcement. Traders might consider buying near-term options to position for such an event.

Scenario For Coordinated Intervention

If coordinated intervention were to occur, we could see USD/JPY fall by three to five big figures in a very short period. This would mean a rapid drop from near 160 down towards the 155-157 range. Buying yen calls or dollar puts offers a direct way to position for this potential outcome. However, we must consider that any intervention-led drop may not be sustainable unless oil prices also retreat. The underlying pressure on the yen comes from fundamental factors that intervention alone cannot solve. This suggests any short dollar positions should be viewed as tactical, requiring close management. The market is viewing these psychological levels as the most likely source for a large supply of dollars anytime soon. This is not just a Japan story, as authorities in Korea are also watching the 1500 level in USD/KRW. This regional pressure increases the chances that at least one central bank will act in the coming weeks. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account