Eurozone GDP growth is projected to slow from 1.5% in 2025 to 1.0% in 2026, then rise to 1.3% in 2027. The slowdown is linked to spillovers from the Middle East conflict.

Inflation is projected at 2.1% in 2025, then rising to 3.0% in 2026 and 3.3% in 2027. Economic activity is expected to withstand energy shocks, supported by spending on defence, artificial intelligence, and electrification.

Key Macro Forecasts

The European Central Bank is expected to raise rates twice in 2026 by 25 basis points each. The first hike is expected in June, taking the deposit facility rate to 2.5%.

The article was produced using an artificial intelligence tool and reviewed by an editor.

With the European Central Bank expected to deliver its first rate hike in June, traders should position for higher short-term interest rates. Options strategies that profit from falling bond prices, such as buying puts on German Bund futures, could be effective. Interest rate swaps that pay a fixed rate in exchange for a floating rate are also a direct way to speculate on the anticipated 25-basis-point hike.

The forecast for inflation rebounding to 3.0% this year warrants attention, especially as the latest flash estimate for April showed inflation ticking up to 2.9%. This upward trend suggests that inflation-linked swaps could be valuable tools to hedge portfolios against rising price pressures. We saw how inflation surprised to the upside in late 2025, and this pattern appears to be re-emerging.

Trading Implications And Positioning

Slowing economic growth creates a challenging environment for stocks, which is reflected in the choppy performance of the Euro Stoxx 50 index so far this year. After the strong gains we saw in 2025, purchasing put options on broad market indices could protect against a potential downturn. The combination of slowing growth and rising inflation presents a significant headwind for corporate earnings.

The prospect of ECB rate hikes while other central banks may be holding steady should provide support for the Euro. In fact, the EUR/USD exchange rate has already strengthened from 1.08 to around 1.10 over the past two months in anticipation of this policy divergence. Traders could consider buying call options on the EUR/USD to profit from further currency appreciation.

However, the outlook is not uniformly negative, as investments in defence, AI, and electrification are expected to remain strong. A more nuanced trade could involve going long on derivatives tied to specific companies or ETFs in these resilient sectors. This could be structured as a pair trade, offsetting a short position on the broader market.

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GBP/USD fell on Monday as Middle East tensions increased, after Iran warned the US Navy against entering the Strait of Hormuz. There was also speculation that Tehran launched missiles at a US warship, and the pair traded at 1.3531, down 0.34%.

The Pound reversed earlier gains and extended a pullback from Friday’s highs above 1.3650. It moved to session lows below 1.3550 as demand rose for the safe-haven US Dollar.

Middle East Tensions Drive Safe Haven Flows

In a separate move, GBP/USD rose past 1.3600 by over 0.50% as the US Dollar weakened for a second day. This followed speculation that Japanese authorities intervened in foreign exchange markets to support the Yen.

At one point, the pair traded at 1.3650, up 0.38% and near a ten-week high. The report was attributed to the FXStreet Team, a group of economic journalists and FX specialists.

We saw this kind of push-and-pull action in 2025, where conflicting headlines created choppy conditions for the Pound. Geopolitical flare-ups in the Strait of Hormuz strengthened the safe-haven Dollar, while Japanese intervention to support the Yen weakened it a day later. This whip-saw price action last year showed us how quickly the primary driver for GBP/USD can change.

A similar dynamic is emerging now in May 2026, creating tension for the Dollar. Renewed friction in the South China Sea, through which nearly a third of global maritime trade passes, is providing a bid for safe-haven assets. This is reminiscent of the Hormuz risks we saw last year and could cap any significant upside for GBP/USD in the near term.

Central Bank Intervention Adds Another Layer

However, just as Japanese intervention battered the Dollar in 2025, we are now seeing persistent rumors that the People’s Bank of China is actively managing the Yuan’s depreciation. Any significant state-led selling of the Dollar to prop up the Yuan would create a headwind for the US currency. This leaves the greenback caught between geopolitical bids and central bank intervention flows.

On the British side of the pair, things are not straightforward, which points toward volatility. The latest UK CPI inflation data came in hotter than expected at 3.1%, making it difficult for the Bank of England to signal rate cuts. This stickiness in prices complicates the picture and could offer the Pound some underlying support.

Conversely, the US economy continues to show strength, with the most recent Non-Farm Payrolls report adding a robust 265,000 jobs. This divergence has led Fed funds futures to price in only one potential rate cut for the remainder of 2026. This policy split between a hesitant Bank of England and a hawkish Federal Reserve traditionally favors the Dollar.

Given these conflicting cross-currents, traders should prepare for increased price swings rather than a clear directional trend. Implied volatility on GBP/USD options, as measured by the Cboe Sterling Volatility Index (BPSVIX), has already ticked up to a three-month high of 9.2%. Strategies that profit from this rising volatility, such as buying straddles or strangles, may be more prudent than betting on a sustained move in either direction over the coming weeks.

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Japan’s Finance Minister Satsuki Katayama said on Monday that Japan is ready to take decisive action against speculative foreign exchange moves under a bilateral agreement with the US from last September. The comments came two trading days after the Ministry of Finance and Bank of Japan confirmed yen-buying intervention on 30 April.

The warning came as USD/JPY traded around 157.00 after falling from a 160.73 high, then recovering roughly half of that drop. Since Friday, the pair has repeatedly stalled in the 157.00–157.50 range.

Intervention Risk And Supply Chain Focus

Katayama also referred to risks to Japan’s Asian supply chains and linked yen weakness to manufacturing competitiveness. The article notes Iran-driven oil prices, elevated import costs, and an active Strait of Hormuz blockade, alongside thinner Golden Week liquidity that was mentioned on Thursday as a possible window for further action.

Since Thursday, USD/JPY regained nearly half of the intervention move within 24 hours but was rejected each time near 157.50. The report also describes intermittent falls towards 155.50 and raises the possibility that 157.50 is now a key level for official action.

The renewed warnings from Tokyo mean that high volatility in the dollar-yen pair is now the primary factor to trade around for the next few weeks. We believe the focus should be on options strategies that profit from sharp price swings rather than betting on a sustained direction. One-week implied volatility has already surged past 15%, a spike we haven’t seen since the market turmoil of early 2024, signaling that traders are bracing for another sudden move.

With the 157.50 level now acting as a clear ceiling, selling short-dated USD/JPY call options with strikes above that area presents a viable strategy for earning premium. The options market confirms this sentiment, as risk reversals show the largest skew toward yen calls in over a year, indicating investors are paying dearly for downside protection on the pair. This suggests that while the underlying trend is up, the market is respecting the immediate threat of intervention from authorities.

This aggressive stance comes even as the fundamental picture favors a stronger dollar, with the interest rate differential between the US and Japan holding above 525 basis points. We saw last week that US inflation data remains persistent, keeping the Federal Reserve from signaling any policy pivot. This forces a conflict between powerful monetary policy fundamentals and the direct firepower of the Bank of Japan.

Historical Playbook And Multi Week Currency Battle

We should look to the interventions we saw back in late 2022 as a guide, where it took multiple rounds of yen-buying to meaningfully turn the market. This is likely not a one-time event but the start of a multi-week battle over currency levels. The new framing of intervention as a defense of supply chains gives authorities the political cover needed for a sustained campaign.

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Gold (XAU/USD) started the week weaker, trading near one-month lows. It was around $4,520 in the US session, down nearly 2.0% on the day.

Market conditions remained tense due to uncertainty over US-Iran talks and events around the Strait of Hormuz. A fire was reported at a petroleum industrial site in Fujairah, UAE, after a drone attack said to be launched from Iran.

Geopolitical Tensions And Shipping Risks

Iran’s Fars news agency said two missiles hit a US naval vessel near Jask after it ignored IRGC warnings to stop. A US official denied any American vessel was hit, according to Axios.

US President Donald Trump announced “Project Freedom” to escort commercial ships through the Strait of Hormuz. Tehran warned it would attack US forces if they tried to approach or enter the waterway.

Oil prices stayed elevated due to supply disruption risks, raising inflation concerns. This supported higher US Treasury yields and kept pressure on non-yielding gold.

CME FedWatch showed expectations for the Fed to hold rates through this year, with markets pricing in hikes next year. The probability of a January 2027 rate rise moved to 22% from near 0% a week earlier.

Technical Levels And Trading Focus

On the 4-hour chart, price stayed below the 20-period SMA near $4,590.71 and just under the lower band around $4,519.06. RSI (14) was near 33, with resistance at $4,519.06, $4,590.71, $4,662.35 and $4,850.00, and support near $4,400.

As of today, May 4, 2026, we see gold under significant pressure from a hawkish Federal Reserve. With the 10-year Treasury yield now pushing 5.5%, the appeal of holding a non-yielding asset like gold is diminishing rapidly. This follows last month’s surprisingly strong Nonfarm Payrolls report, which showed the US economy adding 315,000 jobs in April 2026 and reinforced the Fed’s tough stance.

For the coming weeks, we should consider buying put options to capitalize on this downward momentum, especially with key US jobs data on the horizon this Friday. Another strong report would likely solidify bets on a 2027 rate hike and could push gold toward its key support level at $4,400. The current bearish trend appears to have room to run before it becomes technically oversold.

However, we must also account for the extreme geopolitical risk from the Strait of Hormuz. With Brent crude now trading above $120 per barrel due to supply fears, any direct military escalation between the US and Iran would trigger a flight to safety. This situation is reminiscent of the regional tensions in 2019 and 2020, which created a solid floor under gold prices.

Given this explosive potential, holding some out-of-the-money call options as a hedge against a sudden spike is a prudent strategy. The market is caught between these two powerful forces, making volatility plays like straddles attractive. This allows us to profit from a large price swing in either direction, which seems likely given the fundamental conflict between Fed policy and Middle East instability.

The upcoming US ISM Services PMI and JOLTS data this week will provide the next major clues. Weak economic data could slightly ease the hawkish Fed pressure and give gold some breathing room. Conversely, strong data will confirm the market’s bearish bias and likely accelerate the move down towards that $4,400 support zone.

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EUR/GBP rose on Monday amid higher market volatility linked to tensions in the Middle East and added uncertainty in UK politics. The pair traded near 0.8645 after an intraday low of 0.8629.

A fire was reported at a petroleum site in Fujairah, UAE, after a drone attack from Iran. Iran’s Fars news agency said two missiles hit a US naval vessel near Jask, while a US official denied any vessel was struck, according to Axios.

Geopolitical Risk And Oil Shock

The pair has faced downward pressure since the start of the US–Iran war and disrupted shipping through the Strait of Hormuz. The Strait carries about 20% of global oil supply, and the UK is described as less dependent on imported energy than the Eurozone.

Market pricing reflects expectations that rate differences between the Bank of England and the European Central Bank may widen, as oil prices raise inflation risks. UK inflation remains above the BoE’s 2% target, while Eurozone price pressures are reported to be rising but more contained.

Markets are pricing in at least two rate rises from both central banks. In the UK, local elections are due on Thursday, and a Labour leadership contest can be triggered by a resignation or support from at least 20% of Labour MPs.

Looking back to 2025, we saw EUR/GBP under pressure due to the US-Iran war disrupting oil flows through the Strait of Hormuz. While that direct conflict has since stabilized into a tense truce, the geopolitical risk premium remains, with Brent crude prices holding firm around $95 a barrel as of late April 2026. This is well above the pre-2025 average and continues to fuel underlying volatility in currency markets.

The interest rate divergence we anticipated last year has fully materialized, pushing the cross lower. The Bank of England (BoE) acted more aggressively through late 2025 to combat inflation, with its Bank Rate now at 5.75%, while the European Central Bank (ECB) was more cautious and sits at 4.00%. This significant 175-basis-point differential continues to make holding pounds more attractive than euros for yield-seeking investors.

Policy Divergence And Trading Implications

This policy gap is justified by recent data, which shows UK core inflation remaining stubbornly high at 3.5% in the year to April 2026. In contrast, Eurozone core HICP has fallen more convincingly to 2.4%, increasing market speculation that the ECB may be in a position to cut rates before the BoE. This fundamental backdrop suggests the path of least resistance for EUR/GBP remains to the downside.

For derivative traders, this environment suggests selling rallies in the spot market while using options to manage the headline risk. The elevated geopolitical tension means implied volatility will likely stay above its long-term averages, making strategies like selling out-of-the-money call options on EUR/GBP potentially profitable. We believe any move back towards the 0.8500 level could present a good entry point for such positions.

However, with much of the rate divergence now priced in, traders should be wary of a sharp reversal if UK economic data starts to weaken unexpectedly. Buying cheap, short-dated EUR/GBP put options offers a defined-risk way to position for a continued grind lower towards the 0.8300 support level seen in 2022. This strategy allows participation in the downtrend while limiting potential losses if sentiment shifts.

The political focus has also shifted since the Labour party’s poor showing in the May 2025 local elections. Now, markets are looking ahead to the next general election, with polls showing the government’s lead narrowing. This emerging political uncertainty could begin to weigh on the pound, suggesting that traders should remain nimble and perhaps hedge their core short EUR/GBP view.

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Turkey’s monthly inflation in April was 4.1%, above the market consensus of 3.2% and ING’s 2.9% forecast. Annual Consumer Price Index (CPI) rose to 32.4% from 30.9% in March.

The 32.4% annual CPI rate is above the Central Bank of Turkey’s 16% target. It is also above the bank’s 15–21% forecast range in its latest inflation report.

Drivers Behind The Inflation Surprise

Food, housing and transportation were the main drivers of the higher-than-expected outcome. Core and services inflation remained elevated.

Preliminary seasonally adjusted data from TurkStat, monitored by the Central Bank, showed the three-month moving average trend rose in headline, core and services measures. This points to ongoing difficulties in lowering inflation.

Global commodity prices, especially oil, were identified as key near-term risks for producer price inflation (PPI). Rising energy prices, moderating growth prospects and dollarisation risks reduce the scope for interest rate cuts.

The article states it was produced with the help of an AI tool and reviewed by an editor.

Implications For Markets

Looking back at the analysis from April 2025, the warnings about stubborn inflation were an understatement. The latest data shows annual CPI just came in at 45% for April 2026, which is far above the 32.4% we were looking at last year. This confirms that the challenges to disinflation have only intensified over the past twelve months.

As we suspected, the Central Bank had no room to cut rates and was instead forced into a series of aggressive hikes throughout late 2025 and early 2026. With the policy rate now sitting at 50%, the market is pricing in a “higher for longer” scenario. Therefore, traders should be cautious about positioning for any rate cuts in the near term, with options pricing suggesting high volatility around future central bank meetings.

The dollarisation risks flagged last year have fully materialised, putting sustained pressure on the Lira. We have seen the USD/TRY exchange rate depreciate from around 30 to over 40 in that time. Derivative strategies should favour continued Lira weakness, and traders could use forward contracts to hedge against further declines.

Global oil prices remain a key risk, just as they were in 2025. With Brent crude now trading around $95 a barrel, Turkey’s significant energy import bill continues to strain its finances. This external pressure makes any significant improvement in the country’s current account unlikely, reinforcing the bearish outlook on Lira-denominated assets.

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GBP/USD fell on Monday as Middle East tensions increased near the Strait of Hormuz. The pair was at 1.3531, down 0.34%.

Iranian media said a US ship was targeted, while Axios cited a US senior official denying any attack. Iranian media also published footage said to show “warning shots” at US Navy destroyers entering the Strait of Hormuz.

Dollar Strength On Rising Geopolitical Risk

US data showed Factory Orders rose 1.5% month-on-month in March, above forecasts for a 0.5% rise, after 0.3% growth in February. The US Dollar Index was up 0.19% at 98.39, while UK markets were shut for a public holiday.

The UAE reported a fire at petroleum facilities after an Iranian drone attack, lifting oil prices, including WTI. The report stated WTI and the US dollar have a positive correlation.

Upcoming events include a speech from New York Fed President John Williams and Tuesday’s ISM Services PMI. No UK releases are scheduled for the first two days of the week.

Technically, GBP/USD was around 1.3532, above simple moving averages near 1.3413. Resistance was cited around 1.3920 and 1.3869, with support near 1.3413, then 1.3035 and 1.2885.

Options Positioning And Volatility Risks

With tensions escalating in the Strait of Hormuz, we are seeing a classic flight to safety that is strengthening the US Dollar. This is a critical chokepoint, as roughly one-fifth of the world’s total oil consumption passes through it daily. Any disruption here points towards continued demand for the dollar as a haven asset in the coming weeks.

The surge in WTI crude prices is directly fueling this dollar rally, a dynamic we’ve seen strengthen as the US has solidified its position as a major energy producer. Unlike the oil shocks of previous decades, higher oil prices can now provide a net benefit to the US economy, supporting the Greenback further. We believe call options on oil and USD-tracking funds are a logical response to this environment.

Sterling is particularly vulnerable, caught between a stronger dollar and its own closed markets, making it an easy target for sellers. This situation is reminiscent of the pressure the pound faced during the energy price shocks we saw back in 2022, when a reliance on energy imports weighed heavily on the currency. We are positioning for further downside in GBP/USD, potentially using put options to target the 1.3413 support level.

We anticipate a significant spike in market volatility, likely pushing the CBOE Volatility Index (VIX) well above its recent average of 14. This means option premiums will become more expensive across the board. Traders should be prepared for wider price swings and consider strategies that benefit from rising implied volatility.

The upcoming US ISM Services PMI on Tuesday is now a key event to watch. Recent readings through 2025 have consistently stayed above the 50 expansion mark, so another strong number would reinforce the narrative of US economic outperformance and give the Federal Reserve less reason to ease policy. This would add another layer of support for long dollar positions against the pound.

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AUD/USD traded cautiously near 0.7190 ahead of the Reserve Bank of Australia (RBA) policy decision due later on Monday. The RBA is widely expected to raise rates by 25 basis points for a third straight increase, taking the Official Cash Rate to 4.35% from 4.10%.

The Australian Dollar had some support from expectations of tighter policy, but price moves were limited before the decision and any guidance. Broader risk sentiment stayed fragile amid reports that Iran allegedly attacked US military boats, alongside denials from the US.

Technical Levels In Focus

The four-hour chart showed AUD/USD around 0.7175, sitting on the 20-period simple moving average near 0.7175. It was also holding just above the 100-period SMA at 0.7151, while the RSI near 48 pointed to limited momentum.

Resistance was seen at 0.7195, then 0.7200 if price breaks higher. Support levels included 0.7175, 0.7174 and 0.7168, with the 100-period SMA at 0.7151 as the next key floor.

We remember looking at a similar setup back in mid-2025 when the RBA was hiking rates to a peak of 4.35% and the Aussie was trading near 0.7190. That period of policy tightening was meant to fight the persistent inflation pressures we were seeing across the economy. At the time, geopolitical jitters were also keeping the US Dollar strong, capping any significant gains for the AUD.

Today, the situation has evolved, as the AUD/USD now trades closer to 0.6650. The Reserve Bank of Australia has since reversed course, cutting the cash rate to 3.85% to support a slowing economy, while the U.S. Federal Reserve has held its rate higher at 4.75%. This interest rate difference, or spread, heavily favors holding US Dollars, which has been a primary driver of the Aussie’s decline over the past year.

Policy Divergence And Market Impact

Australian inflation has cooled significantly from its peak, with the latest quarterly CPI figure coming in at 3.1%, but it remains stubbornly just outside the RBA’s 2-3% target band. This persistence creates uncertainty about the timing of any further rate cuts, leading to choppy price action. Derivative traders should be pricing in this policy indecision, as any surprise data could cause a sharp move.

The theme of fragile risk appetite continues, though the focus has shifted from the Middle East to ongoing tensions in the South China Sea. These concerns continue to bolster the safe-haven appeal of the US Dollar, creating a constant headwind for risk-sensitive currencies like the AUD. This backdrop suggests that any rallies in the AUD/USD are likely to be sold into until a clearer de-escalation occurs.

Given the uncertain path for RBA policy and the steady strength of the dollar, implied volatility in the AUD/USD has picked up, with the CBOE AUD Volatility Index hovering around 9.5. This environment is ideal for strategies that profit from price movement itself, regardless of direction. Traders could consider buying straddles or strangles to position for a breakout from the current range as central bank decisions approach.

For those with a directional bias, using options can define risk in this uncertain market. If we expect the interest rate differential to keep weighing on the Aussie, buying AUD/USD put options offers a clear way to speculate on further downside. This strategy limits the maximum loss to the premium paid, a crucial safeguard when market sentiment can shift so quickly.

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USD/JPY traded near 157.00 on Monday, little changed on the day. Earlier in Asia it dropped to 155.71 before rebounding.

The move had no clear trigger, leading to talk of Japanese action in the currency market. Japan’s Ministry of Finance has not confirmed any steps.

Intervention Speculation Builds

Moves across yen pairs added to the intervention view. Reuters cited estimates that about 5.48 trillion JPY may have been used last week to support the yen.

Finance Minister Satsuki Katayama said Japan is ready to act against speculative moves. She spoke after the Asian Development Bank annual meeting in Uzbekistan and said any measures fit a US deal reached last year.

Some banks, including MUFG and OCBC, expect more intervention if USD/JPY stays near 160.00. Longer-term direction is linked to the Bank of Japan policy path and possible rate rises later this year.

External risks continued to support the US dollar. Middle East tension around the Strait of Hormuz and uncertainty over a US-Iran incident kept risk appetite weak.

Key Data And Market Risks Ahead

The US Dollar Index was around 98.25. Markets are awaiting US Factory Orders, the ISM Services PMI, and Friday’s Nonfarm Payrolls report.

We are seeing USD/JPY steady around 157.00 after a suspected second round of intervention from Japanese authorities. Last week’s moves, where official data later confirmed around ¥9.79 trillion was spent to defend the yen, show they are serious about the 160.00 level. Their official statements confirm they are ready to act decisively against speculators at any time.

Despite these actions, the fundamental problem for the yen remains the huge gap in interest rates. The US Federal Reserve’s key rate is holding firm in the 5.25-5.50% range, while the Bank of Japan’s is barely above zero. This wide differential means traders can profit simply by holding dollars over yen, keeping upward pressure on the pair.

For traders, this situation feels very familiar to what we saw back in 2024. Back then, interventions also provided temporary relief, but the yen’s weakness continued until US economic data started to soften. This history suggests that intervention alone may not be enough to reverse the long-term trend.

In the options market, this creates a tricky environment where implied volatility is elevated. Selling volatility through strategies like short strangles could be profitable if we believe the pair is now capped between 155.00 and 160.00. However, a surprise from US data could cause a sharp breakout, making this a risky play.

We see that buying far out-of-the-money call options above the 160.00 “red line” is exceptionally dangerous. Instead, traders might consider buying yen call (or USD/JPY put) options as a cheaper way to bet on another intervention pushing the pair lower. The pricing of risk reversals already shows a strong bias for more yen strength, as traders are paying a premium for downside protection.

Looking ahead, the US economic data this week is the main event, especially Friday’s Nonfarm Payrolls report. A weaker-than-expected jobs number, perhaps under the recent 175,000 trend, could cool expectations for Fed policy and give the yen some breathing room. A strong report, however, would likely send USD/JPY right back toward the 160.00 danger zone.

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India’s March Index of Industrial Production (IIP) growth slowed to 4.1% year-on-year from 5.2% in February. It was the weakest IIP growth in five months.

The eight-core sector, which is about 40% of IIP, contracted 0.4% year-on-year in March. This was the weakest reading in 19 months.

Industrial Output Signals

Fertiliser output fell 24.6% year-on-year. Power output also softened during the month.

Manufacturing output rose 4.3% year-on-year in March. Manufacturing growth for FY26 was about 5.0% year-on-year, compared with 4.1% in FY25.

Capital goods and infrastructure or construction goods grew faster than staples. Consumer non-durables growth stayed low.

Performance across manufacturing subsectors was mixed. Areas linked to petrochemical inputs and logistics, such as chemicals, electronics, and PCB-related materials, faced exposure to disruption.

Market Positioning Implications

Conflict-driven disruptions were described as likely to pass through with a delay. Effects were noted as likely to emerge later, especially for MSMEs.

Based on the recent industrial production data from March, we see the economy is sending mixed signals as of today, May 4th, 2026. The slowdown in headline growth to a five-month low of 4.1% is a clear warning sign that momentum is fading. The contraction in the core sector, the weakest in 19 months, suggests we should prepare for more softness in the coming economic reports.

The key takeaway for us is the stark difference between spending on big projects and everyday consumer goods. We should consider strategies that take advantage of this split, as capital and infrastructure goods are strong while consumer non-durables are struggling. This view is supported by the latest April manufacturing PMI, which dipped slightly to 58.5 from 59.1, indicating that while still expanding, the pace is slowing.

This creates a clear opportunity for a pairs trade, such as going long on Nifty Infra futures and shorting Nifty FMCG futures. The ongoing strength in capital expenditure, with firms like Larsen & Toubro continuing to report strong order books, contrasts sharply with weak rural demand, a theme that has carried over from 2025. Buying call options on infrastructure-linked stocks while buying puts on consumer staples could protect us from a one-sided market bet.

We must also watch for brewing trouble in sectors dependent on petrochemicals and complex logistics, like chemicals and some electronics. These supply chain issues, driven by geopolitical tensions, will likely hit smaller companies first and could increase overall market volatility. Therefore, buying options that profit from increased price swings, like straddles on the main indices, may be a prudent move for the next few weeks.

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