A senior Iranian official told Reuters that Iran fired a warning shot at a US warship to stop it entering the Strait of Hormuz. The official said it was unclear whether any damage occurred.
Iran’s Tasnim News agency, citing an unnamed source, reported that Tehran is ready for any possible scenario. The report said Iran would not allow US forces to pass through the Strait of Hormuz.
Market Reaction And Dollar Strength
In markets, the US Dollar held firm against other major currencies in the second half of trading on Monday. The USD Index was up 0.2% at 98.40 at the time of reporting.
Given this direct threat to passage through the Strait of Hormuz, we should immediately consider long positions in crude oil derivatives. With nearly 20% of the world’s oil supply transiting this chokepoint, any disruption could send prices soaring. We are already seeing Brent crude futures for July delivery jump over 4% to $92.50 a barrel, so buying call options could prove profitable if the situation worsens.
This level of geopolitical tension will inject significant fear into the market, making long volatility a prudent strategy. The VIX has already surged past 22, a level we have not seen sustained since the banking sector concerns in late 2025. We should consider buying VIX futures or call options as a direct hedge against the broader equity market uncertainty that will follow.
The initial flight to safety is bolstering the US Dollar, which confirms its safe-haven status. As the Dollar Index pushes toward the 99.00 handle, we can use currency options to bet on its continued strength against the Euro and Japanese Yen, which belong to economies highly dependent on imported oil. This trade has performed consistently during past Middle East crises, including the flare-ups we observed in 2024.
Equity Risk And Defensive Positioning
We must also be prepared for a downturn in equity markets, as higher energy costs and war risk can quickly damage investor sentiment. Buying put options on major indices like the S&P 500 or on exchange-traded funds for the transport sector offers a way to profit from or hedge against a potential sell-off. Reports are already showing that maritime insurance premiums for the region have tripled overnight, indicating a real economic impact is already being priced in.
Finally, this is a classic catalyst for gold, and we should anticipate capital flows into precious metals. Gold is a traditional hedge against conflict and the potential inflationary effects of an oil shock. With gold futures already climbing 1.5% to over $2,450 an ounce, call options could provide leveraged upside if diplomatic solutions fail in the coming days.
