US President Donald Trump posted on Truth Social on Friday that the US would get “nuclear dust” from Iran using B2 bombers.
He said no money would change hands “in any way, shape, or form”, and that the deal was not subject to Lebanon. He added that the US would separately work with Lebanon and address the Hezbollah situation.
Us Prohibits Israel From Bombing Lebanon
Trump also wrote that Israel would not bomb Lebanon any longer and said the US was prohibiting it. He added: “Enough is enough!”
Financial markets were driven by risk-on moves on Friday. At the time of publication, the Dow Jones Industrial Average was up 1.5%, while the Nasdaq Composite and the S&P 500 were each up 1%.
This statement is being read as a significant de-escalation in the Middle East, potentially removing a major risk premium from the market. We are looking to position for a drop in expected market volatility over the next few weeks. The VIX index, which spiked over 21 during the Iran-Israel exchange back in April of 2024, is a key focus for this trade.
The risk premium in crude oil should evaporate quickly if this holds, as the immediate threat to supply in the Strait of Hormuz recedes. We see an opportunity in buying put options on Brent crude futures, which have been trading near $95 a barrel on war fears. When we analyzed the market last year in 2025, we consistently saw prices react sharply to Mideast headlines, suggesting a quick reversal is now likely.
Positioning For Risk On And Lower Volatility
The market’s initial positive reaction suggests a broader risk-on sentiment is taking hold, a trend we expect to continue. We are considering buying near-term call options on the S&P 500 (SPX) and specifically on transportation ETFs, which benefit directly from lower oil prices. This is especially attractive given that recent investor sentiment surveys from last week showed a bearish tilt, with the bull-bear spread at -5%, indicating there is room for a rally.
Conversely, we anticipate weakness in sectors that thrive on conflict, particularly defense and safe-haven assets like gold. We are looking at buying put options on aerospace and defense ETFs, which have seen a nearly 15% run-up so far this year on escalating tensions. We recall how these same defense names rallied throughout late 2025, and a reversal seems logical as gold pulls back from its recent test of the $2,500/oz level.
