The US Dollar Index fell after gains earlier on Monday and ended the day sharply lower. Early Tuesday it stayed below 98.50, its lowest level since early March, before March PPI data later in the US session and speeches from major central bank officials.
On Iran, US President Donald Trump said the US had been approached by the “right people” and that they wanted a deal, and said a US blockade of the Strait of Hormuz had started. US Vice President JD Vance said talks made meaningful progress without a breakthrough, while the New York Times reported Iran proposed a 5-year nuclear suspension and the US sought 20 years.
Market Snapshot And Key Levels
US equities were mixed on Monday, with the S&P 500 down about 0.1% and the Nasdaq up more than 1%. Early Tuesday, US index futures were little changed.
Japan’s February industrial production fell 2% month on month, versus a forecast drop of 2.1%. USD/JPY traded near 159.20, EUR/USD rose towards 1.1800, and GBP/USD moved above 1.3500.
Gold recovered after dipping below $4,650 and moved towards $4,800, while WTI held slightly under $93.00.
We remember the US Dollar Index struggling below 98.50 this time in 2025, which gave a false sense of security. That dollar weakness proved temporary, as persistent US inflation, last reported at 3.4% for the first quarter of 2026, has forced the Federal Reserve to maintain its hawkish stance. We should therefore consider options strategies that protect against renewed dollar strength, a significant reversal from the market sentiment a year ago.
The tensions in the Strait of Hormuz mentioned last year never fully resolved, creating an underlying bid for oil prices. With roughly 25% of the world’s seaborne oil supply still transiting that chokepoint, West Texas Intermediate crude has been trading in a volatile range between $90 and $105 for the past six months. Volatility-based derivatives, such as straddles on oil futures, are an appropriate strategy to trade the unpredictable geopolitical headlines.
Positioning And Hedging Ideas
Last year’s mixed signal in equities, with the Nasdaq outperforming, evolved into a theme of narrow market leadership throughout 2025. Now, with the S&P 500’s top ten components making up over 35% of the index’s weight, the risk of a sudden correction is elevated despite the VIX holding near a low of 15. We are using put spreads on major indexes as a cost-effective hedge against a potential downturn in the coming weeks.
The push toward 1.1800 for EUR/USD in April 2025 now seems like a distant memory. The European Central Bank has since pivoted due to slowing growth, signaling potential rate cuts as Eurozone inflation fell to just 2.1% in the latest reading. This growing policy divergence with the Fed suggests that any short-term strength in the euro is an opportunity to position for further downside.
Gold’s rally toward $4,800 an ounce last year was a key signal, driven by persistent central bank buying which saw over 900 tonnes added to reserves globally through 2025. That underlying support, combined with geopolitical risk, has helped gold consolidate above the $5,000 level. We see buying call options on any significant dips as a prudent way to maintain upside exposure while defining risk in this high-priced environment.
