President Donald Trump noted that trade talks are advancing, with new deals set to be announced soon. He highlighted trade’s ability to promote peace and is open to discussions with Europe, as well as the EU regarding trade agreements. Trump mentioned that he regularly speaks with Russian President Vladimir Putin to seek a resolution in Ukraine. He suggested imposing 100% tariffs on Russia and secondary sanctions on nations buying Russian oil if a peace deal isn’t reached within 50 days. American Patriots and additional weapons shipments are expected to arrive in Ukraine shortly. Trump believes that a peace deal has been close several times and sees this moment as a significant opportunity for peace.

Trade Tensions and Market Opportunities

Following the former president’s comments, we believe that the upcoming weeks will offer varied opportunities, requiring a dual strategy. The discussions about trade deals with Europe and advancements with China could ease global trade tensions. We’ve seen this before; during the 2018-2019 tariff disputes, any hint of a deal would boost stock prices. With the VIX, which measures market fear, already at a two-year low around 13, traders should take note. The market isn’t prepared for good news. We suggest selling volatility on major market indices like the SPX could be beneficial, potentially leading to a rise if trade tensions lessen as Trump suggests. In contrast, the situation with Russia is far more complex and volatile. The 50-day deadline set by Trump signals a clear decision point. It’s not a gradual change; it’s an immediate switch. If a peace deal is reached, despite new weapon shipments, this could lead to a significant rally in European markets and a drop in energy prices. Conversely, enforcing 100% tariffs and secondary sanctions would cause a major shock to the energy sector.

Preparing for Oil Market Volatility

We see the greatest opportunity in oil. Russia still exports over 7 million barrels of oil and fuel daily. Secondary sanctions could drastically reduce this from the global market, a much tougher action than the current price cap. Remember, Brent crude surged over 30% in the month following the 2022 invasion. This type of volatility is what we need to prepare for. Instead of betting on peace or war, we should focus on the volatility itself. We are considering long-dated straddles on oil futures or related ETFs like USO. This strategy allows traders to benefit from a significant price spike due to sanctions or a sharp drop following an unexpected peace agreement. The key is to prepare for a swift movement, as current stability is likely to change once the 50-day deadline passes. Create your VT Markets account and start trading now.

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