US Vice President JD Vance said talks with Iran are continuing, and the US is pursuing a broader agreement linked to Iran’s economic ties with the wider world. He spoke at a public event and said negotiations are being carried out through multiple channels, including Pakistan.
Vance said discussions have made tremendous progress and that the ceasefire has held for a seventh consecutive day. He said a deal is not expected quickly due to decades of mistrust between the two sides.
He said Washington will never allow Iran to possess nuclear weapons. He added that if Tehran behaves like a normal country, it would be treated economically as one, including deeper integration into global trade and financial systems.
Markets were described as reacting with a generally positive tone in equities, with comments seen as keeping the option of diplomacy open. The reaction was linked to a risk-on mood in broader markets.
The ongoing talks with Iran are suppressing volatility in the energy markets, keeping a lid on oil prices for now. With the ceasefire holding, the geopolitical risk premium that was priced into crude oil during the tensions of late 2025 has evaporated. Traders should note the CBOE Volatility Index (VIX) is hovering near 14, a sign of market complacency that may not last if these delicate negotiations falter.
Given the potential for a deal to bring over one million barrels of Iranian oil per day back to the official market, we see a clear bearish pressure on WTI crude, which is currently trading around $78 a barrel. This suggests traders could consider buying put options on oil futures, positioning for a price drop toward the low $70s should a diplomatic breakthrough occur. The market is not fully pricing in the high probability of a successful agreement.
This risk-on sentiment, fueled by diplomatic progress, continues to support equities, with the S&P 500 holding near its multi-year highs. Continued positive news from the talks could push the index further, making call options on broad market ETFs an attractive strategy for the coming weeks. However, these positions carry risk, as any breakdown in talks would likely trigger a sharp market reversal.
Because a deal is not guaranteed, hedging against a negative outcome is a prudent move. The “decades of mistrust” mentioned by the Vice President point to a significant chance of failure. Inexpensive, out-of-the-money call options on the VIX would serve as an effective hedge, offering substantial upside if the ceasefire breaks and military tensions re-escalate.
Looking back from our perspective in 2025, we saw a similar dynamic play out in the lead-up to the 2015 JCPOA agreement. Oil prices steadily declined throughout those negotiations as the market anticipated the return of Iranian supply. History suggests that the current quiet period is the time to position for a significant downward move in energy prices upon the finalization of a deal.
