US shares fell as the Dow Jones Industrial Average dropped about 380 points (0.8%) to near 46,300 after opening above 46,800. The S&P 500 slid 0.9% and the Nasdaq Composite lost 1.3% after reports said Iran had stopped negotiating a truce with the US.
Markets reacted to a 00:00 GMT Wednesday deadline set by President Trump for Iran to agree to reopen the Strait of Hormuz. He threatened strikes on power plants and bridges if no deal was reached, while reports said US forces carried out overnight strikes on Kharg Island.
Oil And Safe Haven Moves
Oil prices rose, with WTI futures up 3% to above $116 a barrel and Brent above $110. The Strait of Hormuz carries about a fifth of global oil supply, while gold traded near $4,660.
Broadcom shares gained 3% after detailing AI deals with Google and Anthropic. The Google agreement runs through 2031, Anthropic will access about 3.5 gigawatts from 2027, and it reported a $30 billion revenue run rate, up from $9 billion at end-2025, with over 1K customers spending more than $1 million a year.
US durable goods orders fell 1.4% month on month, with transportation equipment down 5.4%, while ex-transport rose 0.8% and core capital goods orders rose 0.6%. The VIX closed near 24, with FOMC minutes due Wednesday, then Q4 GDP revisions and February PCE on Thursday, and March CPI on Friday.
With the Iran deadline creating significant uncertainty, we should focus on near-term portfolio protection. The Cboe Volatility Index (VIX) at 24 is elevated, but historical precedent from geopolitical shocks, such as the invasion of Ukraine in 2022 which sent the VIX into the mid-30s, suggests it could go much higher. Buying put options on the S&P 500 or call options on the VIX itself is a prudent hedge against a negative outcome.
The direct impact on crude oil, with WTI futures now over $116 per barrel, presents a clear speculative opportunity. Given that the U.S. Energy Information Administration (EIA) confirms the Strait of Hormuz handles about one-fifth of global oil supply, any real disruption would cause a severe price spike. We can use call options on oil futures or related ETFs to position for this, while being aware that a last-minute deal would rapidly deflate these prices.
Inflation Data And Volatility
Beyond the immediate geopolitical risk, this week’s inflation data, particularly Friday’s March CPI report, will be critical. If the conflict de-escalates, the market will immediately refocus on the Federal Reserve and the impact of higher energy costs on the consumer. During the inflationary period of 2022, CPI releases frequently caused daily market swings of over 2%, suggesting we could use straddles on major indices to trade the expected volatility around the announcement.
We should also note the market’s internal divergence, with Broadcom rising 3% on AI news while the broader indices fell. The disclosure of Anthropic’s revenue run rate soaring from its end-of-2025 level highlights the immense momentum in artificial intelligence that can defy macro headwinds. This points toward relative value trades, like buying calls on select technology leaders while hedging with puts on a broader index like the Russell 2000.
The solid core durable goods report, showing an eleventh straight monthly gain in business investment, should not be completely overlooked. This underlying economic resilience suggests that if the immediate geopolitical threat is resolved, the market could be primed for a sharp relief rally. We must therefore be ready to quickly unwind our defensive positions and reposition for a potential bounce.
