Iran’s foreign minister has spoken with the EU’s foreign policy chief, stating that France, Germany, and the UK have no legal basis to reimpose sanctions on Iran. He highlighted Iran’s readiness to restart nuclear talks, but only if the other countries show genuine intention and goodwill. **Iranian Claims About UN Sanctions** He also argued that the E3’s efforts to revive old UN Security Council resolutions under Resolution 2231 are invalid and pointless. Oil traders are closely monitoring the situation in Iran, as rising tensions in the Middle East could lead to higher oil prices. The letter from Iran’s foreign minister brings uncertainty to energy markets. For derivative traders, this uncertainty often leads to higher volatility, which may cause option prices to increase in the upcoming days. The main question is whether this is mere diplomatic talk or a genuine sign of potential reductions in Iranian oil supply. For those who think this standoff will worsen, buying call options on crude oil futures is a smart way to prepare for rising prices. October or November WTI contracts with strike prices around $95 or $100 a barrel, currently trading near $88, could be appealing. This strategy offers significant upside if sanctions are reimposed, threatening the 1.8 million barrels per day that Iran is currently exporting. **Traders’ Strategies for Volatility** On the other hand, if you believe diplomacy will succeed, oil prices may lose their geopolitical risk premium. Traders with this perspective should look into buying put options on energy ETFs, which would gain from a price drop back to the low $80s. A peaceful agreement would not only maintain Iranian supply but also ease tensions in the Strait of Hormuz. Given the two possible outcomes, trading volatility itself is a smart strategy. A long straddle—buying both a call and a put option at the same strike price—can profit from significant oil price changes, whether due to sanctions or new agreements. We must keep in mind how sensitive the market is to supply disruptions in the Middle East. For example, the attacks on Saudi Arabia’s Abqaiq facility in September 2019 led to a nearly 20% surge in crude prices in one trading session, the largest jump since the 1990s. This history highlights how quickly prices can react, making options a useful tool for managing risk ahead of potential shocks. Currently, the CBOE Crude Oil Volatility Index (OVX) has risen from the low 30s to around 40 in the past month, indicating growing concern among traders. This suggests that the market is on edge and preparing for a major shift. Any solid news from the EU or Iran is likely to trigger this built-up tension. Create your live VT Markets account and start trading now.

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