US equity futures edged higher on Tuesday, helped by gains in some tech shares. Sentiment improved after Iran said it would not stop vessels using the Strait of Hormuz, following two Chinese-listed vessels that passed through earlier without US action.
US stocks rose, led by consumer discretionary, communication and tech, while energy lagged as Brent crude fell below $98 per barrel. The S&P 500 continued to recover losses linked to the start of the Middle East conflict.
Markets Shift Toward Risk Assets
JP Morgan reported Q1 revenue up 10% year on year to $49.84bn, above the $49.1bn expected. Net interest income rose 9% to $25.48bn, with a 2026 net interest income forecast of $103bn, while the shares were down 0.4%.
Trading revenue rose by nearly $4bn to $23bn, and investment banking fees increased 28%. The bank pointed to consumer strength for now, but also risks from war-related factors and energy price swings.
Software shares rebounded, with Oracle up 12% on Monday and a further 6% early Tuesday. Oracle remains nearly 50% below its September peak, and said its technology is saving US consumers $300mn a year.
Sterling rose as the dollar eased, despite weaker UK data. The IMF cut the UK’s 2026 GDP forecast to 0.8% from 1.3%, while a 10-year Gilt auction priced at 4.9% versus a 4.76% market level, and UK 10-year yields were down 5 bps.
Strategies For Volatility And Hedging
With the geopolitical temperature in the Middle East cooling, we see a clear signal to re-engage with risk assets, particularly in the tech sector. The CBOE Volatility Index (VIX) has fallen below 15 for the first time since the conflict began, supporting the case for buying short-dated call options on tech-heavy indexes like the Nasdaq 100. This rally in names like Oracle shows a renewed appetite for software stocks that were heavily sold off in late 2025.
This rebound in tech feels familiar, reminding us of the sharp recovery in growth stocks during the second quarter of 2023 after a period of intense pressure. Oracle’s demonstration of real-world AI utility provides a fundamental reason for this optimism, suggesting the market is ready to reward innovation again. We should consider selling out-of-the-money put spreads on leading software ETFs to capitalize on this rising sentiment and decaying volatility.
The de-escalation in the Strait of Hormuz is putting direct pressure on crude oil, with Brent now under $98 a barrel. Recent data from the Energy Information Administration confirms this weakness, showing an unexpected build in US crude inventories of 2.8 million barrels last week. This fundamental pressure suggests buying put options on energy sector ETFs like XLE could be profitable as oil prices search for a new, lower floor.
JPMorgan’s cautious outlook on the American consumer should not be ignored, even as the broader market rallies. Federal Reserve data released last week showed revolving credit debt hitting a new record high of $1.5 trillion, confirming that household finances are stretched. This creates an opportunity to hedge the current optimism by purchasing longer-dated put options on consumer discretionary ETFs, which will pay off if this underlying weakness surfaces later this year.
In the currency market, the pound’s strength appears disconnected from the UK’s bleak economic reality. The UK just paid the highest yield since 2008 to borrow money, and the IMF has slashed its growth forecast, yet sterling continues to climb against the dollar. This divergence suggests the pound is being lifted by the global risk-on mood, creating a potential opportunity to short the currency via futures or options once this initial wave of optimism fades.
