WTI traded near $98.25 on Tuesday, up 0.21% on the day, but below earlier weekly highs. Trading stayed cautious ahead of renewed US-Iran talks aimed at extending a ceasefire as it nears expiry.

Reports said Iran plans to send a delegation to Islamabad for a second round of talks with Washington. US President Donald Trump said Vice President JD Vance could travel to Pakistan to resume negotiations.

Supply concerns persisted in the Strait of Hormuz, which handles about 20% of global Oil trade and nearly 30% of the world’s Gas production. Military tension and maritime incidents have slowed shipping in the area.

The International Energy Agency’s Fatih Birol said the Iran conflict has triggered “the worst energy crisis in history”, and compared it with the Oil crises of 1973, 1979, and 2022. Markets also awaited American Petroleum Institute data, with consensus expecting a draw of about 1 million barrels for the week ending April 17, after a 6.1 million-barrel rise the prior week.

WTI is a US crude benchmark, sourced in the United States and distributed via the Cushing hub. Its price is driven by supply and demand, OPEC decisions, the US Dollar, and weekly API and EIA inventory reports, which are within 1% of each other 75% of the time.

The current price of WTI crude around $98.25 is heavily influenced by geopolitical tension, creating a volatile environment. We are seeing a direct clash between bearish diplomatic hopes and bullish supply realities in the Strait of Hormuz. This uncertainty suggests that large price swings are more likely than a stable trend in the coming weeks.

The warnings about this being the “worst energy crisis in history” should be taken seriously, as it echoes the sentiment from early 2022 when prices surged above $120 a barrel. For traders who believe the US-Iran negotiations will fail, buying out-of-the-money call options is a way to position for a potential spike towards those previous highs while limiting downside risk. A failure in talks could quickly erase any optimism priced into the market.

Conversely, the possibility of a diplomatic breakthrough presents a significant downside risk for oil prices. We can look back to the period leading up to the 2015 JCPOA deal, where the prospect of returning Iranian barrels to the market weighed on prices for months. Traders anticipating a successful outcome could use put options to target a fall back toward the $85-$90 range.

Given the binary nature of the outcome, trying to predict the direction is extremely risky. A more prudent approach may be to trade the volatility itself through options strategies like a long straddle, which profits from a sharp price move in either direction. The CBOE Crude Oil Volatility Index (OVX) is likely elevated in this environment, reflecting market anxiety similar to the spikes we saw during banking fears in 2025.

We must also watch the upcoming weekly inventory data closely, as it provides a fundamental check on the market balance. While consensus points to a 1-million-barrel draw, recent EIA reports have been unpredictable, with a surprise build of 2.7 million barrels just two weeks ago causing a sharp intraday drop. A significant build this week could compound any positive diplomatic news and accelerate a price decline.

Finally, we have to consider the role of OPEC+, which has maintained production discipline throughout the past year to establish a floor for prices. Their current quotas provide a buffer, suggesting that even with a US-Iran deal, prices may find support near the low $80s. However, any sign that the group might increase production to compete with new Iranian supply would remove this safety net.

EUR/USD fell on Tuesday as the US Dollar steadied and Eurozone sentiment weakened, though losses were limited and the pair stayed near recent highs amid uncertainty over possible US-Iran talks. It was trading near 1.1755, while the US Dollar Index was around 98.32.

US Retail Sales rose 1.7% month-on-month in March, above the 1.4% forecast and up from 0.7% in February, with higher petrol prices linked to tensions with Iran. The Retail Sales Control Group increased 0.7% and Retail Sales excluding Autos rose 1.9%, both above expectations.

Labour data also improved, with the ADP Employment Change 4-week average rising to 54.8K from 39K. The figures point to ongoing US economic strength and may support a longer period of unchanged Federal Reserve policy, with oil-related inflation risks still monitored.

Kevin Warsh, a Fed Chair nominee, called for a new inflation framework and described a policy “regime change”, while criticising reliance on forecasts. Focus also remained on a ceasefire deadline on Wednesday and uncertainty about further talks in Pakistan after a weekend incident in the Strait of Hormuz, with Iran yet to confirm participation.

The recent beat on US Retail Sales points to a resilient American consumer, a trend we see supported by the latest US CPI data holding firm at 3.1%. This contrasts sharply with the Eurozone, where the most recent Manufacturing PMI dipped to 49.5, signaling a potential contraction. Therefore, we should consider strategies that benefit from a stronger dollar against the euro, such as buying puts on the EUR/USD pair.

With the US-Iran ceasefire deadline approaching this Wednesday, we must prepare for a spike in market volatility. The CBOE Volatility Index (VIX) is already elevated, trading around 22, which reflects the market’s anxiety over this binary event. We could look at buying straddles on oil futures, as a failure in peace talks could send WTI crude, currently near $95 a barrel, significantly higher.

Kevin Warsh’s call for a new inflation framework introduces long-term uncertainty about Federal Reserve policy, which is a major shift from the predictable stance we saw through much of 2025. Given the strong economic data, market expectations reflected in Fed Funds futures now price a 60% probability of a rate hike at the next meeting. We can use options on SOFR futures to position for a potentially more hawkish Fed than the market has been accustomed to.

The Dollar Index holding above 98 is a direct result of this divergence between a robust US and a softer Eurozone. However, this trend is fragile and hinges entirely on the outcome of the Iran negotiations this week. We will be closely watching for any official statements from Tehran, as confirmation of their participation in talks could quickly reverse recent dollar gains.

Daniel Ghali at TD Securities links gold to a “Hegemon trade”, based on views of US power and fiscal sustainability, and how these affect the US dollar’s store-of-value role. He says perceptions of power shape how foreign creditors, central banks, and wider markets judge the US ability to sustain its “exorbitant privilege”.

He describes last year’s “debasement trade” as most visible in precious metals, and says both themes connect to the dollar’s store-of-value function. He adds that geopolitical staying power is tied to confidence in the US capacity to defend this role.

Ghali says the current “currency defence” phase of the Iran war is bearish for gold while expectations of complete victory rise. He states this reduces gold buying as countries prioritise energy imports and economic and currency stabilisation over reserve diversification.

He says an end to currency defence, including through an unfavourable ceasefire, could drive the next leg of the gold bull market. He links this to faster reserve diversification towards gold, alongside attention on the US debt overhang.

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

Last year, in 2025, we saw the debasement narrative drive precious metals higher. Now, the market’s focus has clearly shifted to what we are calling the Hegemon trade, which links gold’s value directly to global perceptions of US power and its fiscal health. This trade is less about simple inflation and more about the dollar’s long-term role as a store of value.

Right now, the ongoing conflict in Iran is creating a headwind for gold, holding prices in a tight range. Nations involved are in a “currency defense” phase, prioritizing energy security and economic stability over adding to their gold reserves. Recent data from the World Gold Council shows a 15% dip in central bank gold purchases in Q1 2026 compared to the previous quarter, which seems to confirm this temporary shift in priorities.

For the immediate weeks, this suggests a bearish to neutral stance is warranted on gold futures. We see traders buying short-dated put options to hedge against a drop if a favorable ceasefire for the West materializes, which would strengthen the dollar. Implied volatility on near-term gold options has actually decreased to around 14%, suggesting the market is expecting stability, creating cheaper entry points for these protective positions.

However, the major opportunity lies in a potential breakdown of this currency defense. An unfavorable ceasefire agreement from the ongoing talks in Geneva, or any sign that the US is losing geopolitical influence, could be the catalyst for the next major bull market in gold. We saw a similar dynamic in the 1970s when declining faith in US economic stewardship led to a massive re-pricing of gold after the dollar was de-linked.

This is why we are positioning for a sharp upward move by purchasing longer-dated call options, specifically for the September and December 2026 contracts. The market is currently underpricing this geopolitical risk, focusing more on the Federal Reserve’s next move than the growing US debt-to-GDP ratio, which just crossed 125% according to the latest CBO projections. Should sentiment shift, these positions could see significant gains as nations rush to diversify their reserves away from US debt.

Rabobank said UK politics may affect Pound sentiment, with attention on Prime Minister Starmer’s position and Labour’s prospects in May elections. It also noted Starmer faced questions in the House of Commons over the hiring of Mendelson as US ambassador.

The bank linked the Pound’s earlier resilience since the start of the Middle East war to a sharp shift in Bank of England policy expectations. It said those expectations have since been reduced, leaving GBP more exposed while inflation and rate volatility remain high.

In March, markets moved from pricing two 25 bps rate cuts this year to predicting rate rises. This month, as expectations for rate rises eased, GBP slipped down the G10 performance league table.

Rabobank added that inflation concerns supported GBP last month but political uncertainty may weigh on UK markets in spring. The piece was produced using an AI tool and reviewed by an editor.

We can see how the political and rate market volatility of 2025 has shaped the current environment for the Pound. Last year, market expectations swung wildly from rate cuts to hikes, creating significant chop for GBP. That underlying nervousness has not entirely disappeared from the market.

While inflation has cooled from the stubborn levels of last year, the latest March 2026 reading of 3.1% remains well above the Bank’s target. With the economy showing signs of stalling after a 0.1% contraction last quarter, the Bank of England is caught in a difficult position. This is creating a clear divergence between holding rates at 5.50% to fight inflation and the growing need to stimulate growth.

Given this tension, we see implied volatility in GBP options ticking up ahead of the next Monetary Policy Committee meeting. Traders should consider strategies that benefit from this uncertainty, such as long straddles on GBP/USD, which can profit from a significant price move in either direction. The market is currently pricing a 75% probability of a rate cut by August, but any hawkish surprise from the Bank could see the pound rally sharply.

We also cannot ignore the political backdrop, which remains fragile following the slim majority secured in the May 2025 general election. Any challenges to the government’s fiscal plans could easily unnerve investors and put immediate downward pressure on sterling. This political risk premium is likely keeping some long-term buyers on the sidelines for now.

US equity futures fell slightly on Tuesday morning after a sharp rally from April lows, with the S&P 500 pulling back towards a key technical area. The move comes as markets pause after a near-vertical rebound.

The S&P 500 is retreating towards the anchored VWAP from the April lows, while RSI is near 70, pointing to short-term overbought conditions. Early consolidation is forming near recent highs.

The anchored VWAP is a key level, with holding it suggesting the uptrend remains in place. A move below it could lead to a deeper retracement.

Macro factors are also weighing on markets, as tensions in the Middle East around the Strait of Hormuz have pushed oil prices higher. Higher oil raises renewed inflation concerns, which can limit Federal Reserve flexibility and add pressure to equity valuations.

Bullish drivers include earnings expectations, AI-related optimism, and a technical trend that remains intact for now. Risks include higher oil prices, geopolitical uncertainty, and overbought conditions after the recent rally.

Focus points include the reaction at the anchored VWAP, oil price direction, sector rotation such as energy versus tech, and earnings headlines. The overall tone is cautious, with markets pausing rather than selling off.

With the S&P 500 hesitating around 6,150, we are seeing a classic pause after a significant run from the April lows. The CBOE Volatility Index, or VIX, has stirred from its lows near 12 and is now ticking up towards 15, signaling that some caution is returning to the market. This suggests that while outright panic is absent, the cost of portfolio insurance may soon rise.

The key technical level everyone is watching is the anchored volume-weighted average price from the recent bottom, which sits near 6,100 on the S&P 500. A defense of this level by buyers would be a strong signal to add bullish exposure, perhaps through call spreads to cheapen the entry cost. However, a decisive break below it would suggest this rally is exhausted and would make protective puts more attractive.

Rising macro pressures are adding to this uncertainty, especially with WTI crude oil recently pushing past $92 a barrel on geopolitical tensions. This jump in energy costs is stoking fears of a rebound in inflation, especially after the last CPI report in mid-April 2026 showed a stubborn 3.6% annual rate. This environment supports strategies that hedge against inflation, such as positioning in energy sector derivatives or being cautious on rate-sensitive growth stocks.

For the coming weeks, a prudent approach could involve buying some cheap, out-of-the-money puts on broad market indices like the SPY or QQQ. This isn’t a bet on a crash, but rather a low-cost way to protect gains from the recent rally should the technical support fail. If the market resolves higher, the premium paid is a small price for the peace of mind.

This type of setup reminds us of the pause we experienced in late 2025, when the market digested a strong advance before grinding higher into year-end. During that period, patience was rewarded, and selling volatility through strategies like iron condors paid off as the market consolidated. We may be entering a similar phase where the market needs time to absorb its recent gains.

Looking ahead, upcoming earnings reports from major tech companies will likely serve as the next major catalyst. A strong report could easily push the market through resistance and reignite the uptrend. Traders should watch the implied volatility in these individual names heading into their announcements, as it presents opportunities for earnings-specific plays.

US pending home sales fell 1.1% year on year in March. This followed a 0.8% year-on-year fall in the previous reading.

The year-over-year decline in March pending home sales to -1.1% suggests the housing market is losing momentum again. Persistently high mortgage rates, which we see are currently averaging around 6.8% for a 30-year fixed loan, are likely the primary cause for this cooling. This reversal indicates that consumer affordability remains stretched.

We should look at this as a clear signal to consider bearish positions on housing-related equities. Purchasing put options on homebuilder ETFs, like ITB or XHB, for the coming weeks could prove effective. This data serves as a leading indicator for weaker earnings and reduced forward guidance from these companies.

This slowdown complicates the Federal Reserve’s position, especially as the latest inflation report showed CPI still sticky at 3.1%. This growing divergence between a slowing economy and stubborn inflation may lead the market to price in a higher probability of a policy pivot later this year. Consequently, call options on long-duration Treasury ETFs like TLT may offer a valuable hedge against this economic slowing.

The conflicting economic signals are a recipe for increased market volatility. With the VIX currently hovering near multi-month lows around 14, now is a relatively cheap time to purchase protection. We believe buying call options on the VIX or protective puts on broad market indices is a prudent move.

Looking back, this trend is particularly noteworthy when we remember the brief recovery in home sales we saw during the second half of 2025. That period of optimism now appears to have been temporary, with this recent data confirming that the restrictive rate environment is taking a deeper hold. It supports the view that weakness in interest-rate-sensitive sectors will persist.

US business inventories fell by 1.1% in February. This was below the expected rise of 0.3%.

The data shows inventories moved in the opposite direction to forecasts. It indicates a monthly decline in stock levels across US businesses.

The sharp drop in February’s business inventories indicates that consumer and business demand is running much hotter than previously thought. Companies are selling goods faster than they can replace them, which points toward an increase in future production orders to replenish stocks. We are now looking at a setup for stronger economic growth in the second quarter.

This view is supported by the latest data we’ve received for March 2026, which showed retail sales jumping by a robust 0.8%, crushing expectations. Furthermore, the most recent ISM Manufacturing PMI reading registered a 51.5, signaling a clear expansion in factory activity for the first time in several months. These figures confirm the inventory drawdown was caused by strong demand, not a planned reduction by businesses.

The surprising economic strength, however, complicates the inflation picture and the Federal Reserve’s path forward. The March CPI report came in hotter than anticipated at 3.6% year-over-year, which means the Fed now has little reason to consider near-term interest rate cuts. We must now price in the growing likelihood that rates will remain elevated through the summer.

Looking back at 2025, we saw a similar, though less severe, inventory drawdown in the third quarter which was followed by a significant uptick in industrial production into the holiday season. That period also saw bond yields rise as the market priced out rate cuts. This historical parallel suggests a clear pattern that we can expect to repeat.

In the coming weeks, we should consider buying calls on industrial and materials sector ETFs, as these companies will directly benefit from the need to restock. At the same time, traders should look at options strategies that bet against imminent rate cuts, such as selling calls on short-term interest rate futures. Selling out-of-the-money puts on major indices like the S&P 500 could also be attractive, as the strong underlying economy should provide a floor against any significant market downturns.

US business inventories rose by 0.4% in February. This was above the 0.3% increase expected.

The data points to a faster build-up in stock levels during the month. No further breakdown was provided in the update.

The February business inventories report, showing a 0.4% increase, came in slightly hotter than the expected 0.3%. This suggests that production outpaced sales, which could be an early signal of weakening consumer demand. We should view this data point not in isolation but as part of a developing trend for the second quarter.

This inventory build is consistent with the latest retail sales report for March, which showed a disappointing 0.1% increase, missing forecasts and pointing to consumer caution. Simultaneously, the most recent Consumer Price Index data showed core inflation remains persistent at 3.6%, putting the Federal Reserve in a difficult position. This combination of slowing growth indicators and sticky inflation creates uncertainty.

Given this backdrop, we expect market volatility to rise in the coming weeks. The CBOE Volatility Index, or VIX, has already crept up from its lows earlier in the year to trade around 17, reflecting this nervousness. Derivative traders should consider strategies that profit from price swings, such as buying straddles on the SPX ahead of the upcoming Q1 GDP release.

Sectors most sensitive to inventory builds, like consumer discretionary and industrials, warrant a cautious stance. We see an opportunity in buying put options on sector ETFs like the XLY, as these companies are first to feel the impact of reduced consumer spending. Looking back from our 2025 perspective, this environment is reminiscent of the choppy markets of 2023, where growth fears limited upside even as the economy avoided a recession.

The current data makes a summer interest rate cut from the Federal Reserve seem far less likely. Traders should adjust positions in interest rate futures and options to reflect a “higher for longer” policy stance. This could mean selling call options on Eurodollar futures or positioning for a flatter yield curve through options on Treasury bond ETFs.

US pending home sales rose by 1.5% month on month in March. This was above the forecast of 0.1%.

Pending home sales track contract signings for existing homes and can point to near-term market activity. The release shows a 1.4 percentage point beat versus expectations.

The unexpected 1.5% jump in March pending home sales shows the housing market is stronger than we anticipated. This resilience in a key economic sector suggests the Federal Reserve may have less reason to consider cutting interest rates soon. We must now adjust our view that the economy was definitively cooling.

This data directly challenges the market’s recent bets on rate cuts, and we saw a similar pattern in 2023 when strong data repeatedly pushed back the timeline for Fed easing. We should consider options strategies that profit from interest rates remaining elevated, such as puts on Treasury bond ETFs like TLT. The CME’s FedWatch tool has already seen the probability of a mid-year rate cut drop from 55% to below 40% following this morning’s release.

For a more direct play, this is a clear positive for homebuilders and related industries. We should look at buying call options on homebuilder ETFs, which often see sustained gains after such positive surprises. For example, after a similar upside surprise in the housing market last year in late 2025, the ITB homebuilders ETF rallied nearly 10% over the following month.

The stronger US economy, coupled with delayed rate cuts, also points toward a stronger US dollar. This makes call options on the dollar index (UUP) look attractive against currencies from central banks that are closer to cutting rates. Historically, periods of Fed hawkishness, such as the one seen from 2022 to 2024, coincided with significant dollar strength, a trend that could re-emerge now.

Canada’s CPI rose to 2.4% year-on-year in March, with prices up 0.9% month-on-month. The result was 0.2 percentage points below the market expectation of 2.6% and below TD Securities’ 2.5% forecast.

The rise in headline CPI was linked to higher oil prices. Core measures were described as steady, with CPI excluding food and energy edging down slightly.

Three-month annualised core inflation rates were reported as still below target. The Bank of Canada has indicated it will look through short-term inflation spikes.

Rate moves were limited after the release. Yields were about 1 basis point from pre-release levels, while Canada–US spreads were 1–2 basis points tighter.

Market pricing was described as needing more similar inflation readings to reverse earlier expectations seen in March. TD Securities set out a preference for long positions in 2-year bonds and for June/December curve flattener trades.

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

The March Consumer Price Index report showing a 2.4% year-over-year increase should be seen as a green light for dovish positioning. While headline inflation did accelerate, this was widely expected due to the recent surge in WTI crude oil prices, which climbed over 15% in the first quarter of 2026. The real story is the softness in core measures, which gives the Bank of Canada cover to remain patient.

This data reinforces the Bank’s message to look through temporary, energy-driven price spikes. We saw a similar pattern in late 2025 when a brief jump in gasoline prices did not derail the Bank’s increasingly cautious tone. With three-month annualized core inflation rates still tracking below the 2% target, there is little internal pressure for the BoC to consider a more aggressive stance.

The market reaction has been muted so far, which presents an opportunity for traders in the coming weeks. The modest tightening in Canada-U.S. spreads suggests the market is only slowly digesting that its rate hike expectations for later this year were too aggressive. This creates a favorable environment for trades that bet on a reversal of that hawkish sentiment.

Therefore, we maintain a bias toward being long 2-year government bonds, which will benefit as the market prices out the odds of further rate hikes in 2026. Additionally, yield curve flatteners, particularly comparing the June and December contracts, remain attractive. These positions are designed to profit as the market walks back its overly hawkish pricing for the second half of the year.