Trump has announced that Iran and Israel have agreed to a “Complete and Total CEASEFIRE” for 12 hours. This ceasefire is set to begin in about six hours. As of now, there has been no official confirmation from either Israel or Iran regarding this agreement.

Market Reaction

Following this news, crude oil prices have continued to fall, while US equity index futures are rising. Trump shared news about a 12-hour ceasefire between Iran and Israel, which he called “Complete and Total.” According to his announcement, the ceasefire will start roughly six hours later. However, neither Israel nor Iran has confirmed or denied this claim yet, leaving the situation unverified. The market quickly reacted to the announcement. Crude oil prices are dropping, likely due to reduced worries about supply risks in the region. On the other hand, US equity index futures are climbing, possibly indicating relief among investors or adjustments in their positions. Traders who were cautious might now be easing back in response to the temporary drop in regional tensions. In previous situations this year and late last year, we observed similar market trends when geopolitical concerns seemed to lessen. Commodities related to conflict, like oil and natural gas, often pull back, while equity-related instruments, especially index futures, tend to recover quickly. It’s worth noting that past ceasefires in the Middle East have often led to lower volatility in higher-risk assets, but those conditions can change rapidly.

Futures Positioning and Strategy

From a tactical standpoint, we’re seeing lower implied volatility in short-term oil options. This often attracts short gamma positioning seen during quieter geopolitical times. However, trying to capitalize on this opportunity early might be too soon. In three out of the last five instances where regional tensions eased, tactical buyers pulled back within one or two sessions, especially when information was unclear, as it is now. Since there’s no formal agreement from the involved parties, and previous announcements show that unverified news can lead to sharp market corrections in both crude and equity indices. Today, futures positioning in the S&P complex has shifted. A swift movement into Nasdaq futures right before the announcement suggests that there might have been some anticipation. If that’s the case, short-covering may have already taken care of some immediate concerns. We’ll watch how the opening flows in regular cash markets unfold, to see if more investors will get involved or if this was simply caution from overnight traders. In these situations, small changes in volatility products for energy and equities can mislead traders into feeling overly confident. For example, the front-month OVX has sometimes reacted too strongly to diplomatic news that quickly reverses within 48 hours. Remember what happened in late March? A similar drop in implied volatility didn’t last long, providing little benefit for passive sellers. That being said, it’s not just the announcement that matters; we need confirmation—or lack of it—within the next day or so. Market makers have already started adjusting prices for options related to Brent and WTI, indicating uncertainty rather than calm. Additionally, we see sizable open interest in WTI puts around $81.50, which may limit further declines, especially if confirmation doesn’t come. At this point, acting on unconfirmed reports could lead to poor decisions, especially with significant economic reports coming in two days that might overshadow current geopolitical news. Keep an eye on how Brent futures contract terms adjust around the second and third expiry windows—short sellers took profits quickly last time conditions eased without follow-through. Create your live VT Markets account and start trading now.

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