Global stock indices stayed resilient during the oil shock, while valuations and risk premia moved more than headline prices. In the US, weaker prices and higher earnings expectations reduced the S&P 500 valuation multiple.

The US market multiple fell to around 20x, supported by expectations of a strong Q1 corporate earnings season and an upgraded 2026 profits outlook. Earnings yields rose faster than bond yields.

Equity Risk Premium Rising

US real rates, based on long-term Treasury inflation-protected securities, were steady year to date at around 1.9%. As a result, the equity risk premium increased, including in some emerging markets.

The article states that expected equity returns have risen, even if this is not clear from price charts alone. It also notes the piece was produced using an AI tool and checked by an editor.

FXStreet Insights Team compiles selected market observations from external experts and adds material from internal and external analysts, including commercial notes.

Global stock indices have shown surprising strength through the recent oil shock, but the important changes are happening underneath the surface. This resilience suggests the market has digested the negative news, presenting new opportunities for us. We believe the fundamental picture for equities has actually improved, even if price charts do not fully reflect it yet.

Options Strategies For Upside

The S&P 500’s forward price-to-earnings multiple has compressed to around 20x from over 22x late in 2025. This is happening as the Q1 2026 earnings season looks strong, with early reports showing approximately 78% of companies beating profit estimates. This blend of weaker prices and stronger expected profits makes stocks fundamentally more attractive now than they were a few months ago.

Given the improved outlook for future returns, we should consider buying call options on broad market indices to capture the potential upside over the next few weeks. History shows that after initial oil price shocks, such as the one we saw in 2022, markets tend to stabilize and refocus on earnings fundamentals. This suggests a similar pattern could unfold now, rewarding bullish positions.

The gap between what stocks are expected to earn versus bond yields has widened in our favor. Even with the 10-year Treasury yield sitting near 4.6%, the earnings yield on stocks provides a better premium, creating a valuation cushion. This makes selling cash-secured puts or put credit spreads on quality names a compelling strategy to generate income, as it profits from both time decay and the market’s underlying stability.

Volatility has also presented a clear opportunity for traders. The VIX, which spiked above 25 in February 2026 amid fears of supply disruption, has since fallen back to a more stable range around 17. We can take advantage of this by selling volatility, assuming that the worst of the market’s panic is behind us and calmer conditions will prevail.

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Brent crude rose to about USD 95/bbl as tensions between the US and Iran increased around the Strait of Hormuz. Brent closed at USD 90/bbl on Friday after Iran said the strait would remain open for the rest of a 10-day US-brokered truce between Israel and Lebanon.

Iran later said the strait was closed again after the US confirmed a shipping blockade would continue. Iran was also accused of firing on vessels near the strait.

Strait Of Hormuz Risk

Early on Monday, the US intercepted an Iranian cargo ship that was attempting to breach the maritime blockade. Iran said it would retaliate, while plans for a second round of talks remained uncertain ahead of the ceasefire ending on Tuesday.

Iran said it would not take part in talks unless the blockade is lifted. Separately, the US Treasury extended exemptions to Russian oil sanctions by one month.

Oil price moves were linked to disruption risk around the Strait of Hormuz. If oil flows through the strait do not restart soon, Brent could rise above USD 100/bbl again.

With Brent crude jumping to USD 95/bbl this morning, we are advising caution due to extreme volatility. The immediate focus is on the US-Iran negotiations ahead of the ceasefire’s expiration tomorrow. The sharp price moves create significant risks and opportunities in the derivatives market.

Derivatives Market Strategy

The primary risk is a further price spike if the Strait of Hormuz, a chokepoint for nearly 21 million barrels of petroleum liquids per day, remains closed. We see a strong case for buying near-term call options, targeting strike prices above USD 100/bbl, to capitalize on a potential failure in talks. The extension of Russian oil sanctions exemptions suggests to us that Washington is bracing for a continued supply disruption.

Implied volatility in oil options has surged, reflecting the market’s uncertainty. This makes options pricing more expensive, but it also presents a clear opportunity for hedging existing portfolios against a sudden move in either direction. We remember last year, in the fall of 2025, when similar tensions caused a brief but sharp spike, catching many off guard.

A sudden diplomatic breakthrough, however, could cause prices to collapse back toward last Friday’s level of USD 90/bbl or lower. Traders should therefore consider protective put options to hedge against this whipsaw risk. The fast-changing headlines mean that any position requires careful management.

We are also looking at the broader impact, as the recent March 2026 inflation report showed energy prices were a key driver of rising costs. A sustained oil price over USD 100/bbl could pressure equities and force a reaction from central banks. This suggests looking at options on energy-sector ETFs or currency pairs sensitive to oil price shocks.

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USD/CHF edged up to about 0.7820 in early European trade on Monday, holding above 0.7800 after modest losses the prior day. The move followed a firmer US Dollar as expectations for Federal Reserve rate cuts eased amid inflation concerns linked to higher energy prices and Middle East tensions.

Fed Governor Christopher Waller said on Friday that the job market’s break-even rate is likely near zero. He also warned that a prolonged Middle East conflict could raise risks to both inflation and employment.

Fed Officials Signal Inflation Vigilance

San Francisco Fed President Mary Daly said she is assessing whether rising oil prices are feeding into broader goods and services inflation. The US Dollar also drew support from safe-haven demand amid renewed US–Iran tensions.

The Guardian reported on Monday that Iran’s Foreign Ministry spokesman Esmail Baghaei called the US blockade of Iran’s ports and coastline an act of aggression and a ceasefire violation. He said on social media that collective punishment of Iran’s population amounts to a war crime and crime against humanity.

The Swiss Franc may also gain from safe-haven flows, while energy-driven inflation worries could affect Swiss National Bank policy expectations. SNB minutes from March cited rising uncertainty and said the SNB may intervene in FX markets to limit rapid CHF appreciation.

Swiss trade balance data is due Tuesday, with US retail sales due later on Monday.

Market Focus Shifts To Key Data And Strategy

We see the US Dollar strengthening against the Swiss Franc as the Federal Reserve appears unlikely to cut interest rates soon. Recent US inflation data for March 2026 came in at a persistent 3.6%, fueling concerns that the fight against rising prices is not over. This gives the dollar an edge over other currencies, even traditional safe havens like the franc.

The Fed’s cautious stance is creating a clear policy difference with other central banks. Market pricing from the CME FedWatch tool now suggests less than a 40% probability of a rate cut before the fourth quarter of 2026. This expectation for higher US rates for longer makes holding dollars more attractive for yield.

While the Swiss Franc is also seeing safe-haven demand, the Swiss National Bank (SNB) is acting as a cap on its strength. Looking back at 2025, we saw the SNB actively sell francs in the open market whenever USD/CHF dipped toward the 0.7600 level, showing a clear line in the sand. This willingness to intervene makes a rapid appreciation of the franc less likely, even with global uncertainty.

The ongoing tensions in the Middle East are the main driver for both inflation fears and safe-haven flows. With Brent crude oil prices holding stubbornly above $95 a barrel throughout early April 2026, energy costs are feeding directly into global inflation reports. This situation creates uncertainty that benefits both the dollar and the franc, but the Fed’s reaction appears more forceful.

For derivative traders, this conflict suggests a period of rising volatility. We believe that implied volatility on USD/CHF options is currently too low and that purchasing straddles or strangles could be a viable strategy to profit from a larger-than-expected price move in either direction over the coming weeks. The key is to anticipate a breakout from the current tight range.

However, a slight directional bias toward a higher USD/CHF seems warranted due to the central bank divergence. Consider moderately bullish strategies, such as buying call spreads, to gain from a potential upward move while limiting the initial cost. A break above the 0.7900 resistance level could be a key trigger for such a position.

In the near term, all eyes will be on the upcoming US Retail Sales data for a sign of consumer health. Following that, the US Personal Consumption Expenditures (PCE) price index at the end of the month will be crucial. A hot reading on the Fed’s preferred inflation gauge would likely push the dollar even higher.

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USD/JPY briefly tested 159.86 before pulling back as risk sentiment shifted during the week. Comments from Japanese officials and Bank of Japan (BoJ) Governor Kazuo Ueda lowered market pricing for further BoJ rate rises, keeping the yen softer and USD/JPY in the lower 159 area by mid-week.

USD/JPY fell to 158.27 on 16 April after the G7 finance ministers and central bank governors’ meeting. Markets focused on remarks from Finance Minister Satsuki Katayama and Vice Minister of Finance for International Affairs Atsushi Mimura about close Japan–US co-ordination on exchange rates.

Yen Reaction And Policy Signal

The yen’s rally faded and USD/JPY rebounded, as the same remarks also reduced expectations for BoJ tightening. After that, the pair moved back to the lower 159 range.

Attention then turned to Ueda’s press conference on 17 April, where no clear push towards more rate rises was signalled. The yen stayed slightly weaker at the time of writing.

Elsewhere in G10, both the US dollar and the yen were sold again this week. EUR/JPY reached a record high, and AUD/JPY moved above its March peak into the 114 range as Australian rate rises were already under way.

The current situation with USD/JPY pushing towards 164.50 feels very familiar, reminding us of the brief test of the upper 159s around this time in April 2025. Back then, remarks from officials caused a temporary dip, but the underlying trend of yen weakness quickly reasserted itself. We see that same pattern now, where official warnings have a diminishing impact on the market.

Rate Gap Still Dominant

The fundamental reason for yen softness remains the wide interest rate gap, as Bank of Japan Governor Ueda’s cautious stance last year has continued into 2026. While the BoJ has nudged its policy rate to 0.25%, this pales in comparison to the US Federal Reserve’s rate, which sits at 4.0% even after a series of cuts. This significant differential, currently at 375 basis points, continues to make funding trades in yen highly profitable.

This environment suggests traders should be wary of a sudden, sharp drop caused by direct currency intervention from Japanese authorities, a risk that grows above the 160 level. We are hearing the same verbal warnings from officials about watching markets with a “high sense of urgency” that we heard in 2024 and 2025 just before they acted. Buying cheap, out-of-the-money put options on USD/JPY could serve as a valuable hedge against this tail risk in the coming weeks.

We also note that this is not just a story about the US dollar, as the yen is weak across the board. The Australian dollar remains robust, with the Reserve Bank of Australia holding rates steady to combat persistent services inflation, which was last reported at 3.8%. This has kept the AUD/JPY cross well-supported and a more straightforward long position for those looking to avoid US-specific event risk.

The tension between a fundamentally weak yen and the constant threat of intervention has kept implied volatility elevated, with one-month options pricing in more significant swings than other major currency pairs. This suggests that the market is prepared for a large move, but the direction is uncertain. Strategies that benefit from a spike in volatility, rather than a specific direction, may be prudent.

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Silver (XAG/USD) fell 1.7% to about $79.30 in early European trading on Monday after Iran re-closed the Strait of Hormuz. Iran said the move was in response to the United States’ blockade of Iranian sea ports, after previously reopening the route on Friday following a ceasefire between Israel and Lebanon.

Hormuz is a key route for almost 20% of global energy supply, and the re-closure pushed oil prices higher. WTI crude rose 3.7% to around $88, adding to inflation concerns and reducing demand for non-yielding assets such as silver.

The US Dollar firmed as demand for safe assets increased and talks between Iran and the US did not restart. The US Dollar Index (DXY) was up 0.15% near 98.35, making dollar-priced silver less attractive.

Technically, silver stayed above the 20-day EMA at $76.85 and the rising support line near $76, with RSI around 56. Support sits near $76, then $72.61 (April 13 low), while resistance levels include $83.06 (April 17 high) and $87.45 (March 12 high).

Given the renewed closure of the Strait of Hormuz, we should anticipate a spike in market volatility in the coming weeks. We saw a similar pattern during the 2025 Red Sea shipping disruptions, when silver’s implied volatility on options contracts increased by over 25% in a ten-day period. This environment suggests that strategies profiting from price swings, such as purchasing straddles or strangles, could be effective.

The immediate reaction is a stronger US Dollar, which is acting as a significant headwind for silver prices. The Federal Reserve’s March 2026 minutes already indicated a hawkish stance due to core inflation remaining stubbornly above 3.5%, so this new oil-driven inflation scare strengthens the case for higher interest rates. This makes short-term bearish plays, such as buying put options with a strike price near the $76 support level, a logical response to the dollar’s safe-haven rally.

However, the technical structure remains bullish as long as the price holds above the $76 mark. We must remember that during the high inflation period of 2022, silver initially dipped on rate hike fears before ultimately rallying as an inflation hedge. For traders who believe this geopolitical event will be short-lived, the current dip towards $79 could be seen as an opportunity to sell cash-secured puts or buy call options with later expiration dates.

The gold/silver ratio is a critical indicator to watch, as it has now widened to 85:1 from an average of 80:1 in the first quarter of 2026. This indicates silver is underperforming gold amidst the flight to safety, which some traders may interpret as a sign that silver is becoming relatively undervalued. A pairs trade, going long silver and short gold, could be a consideration if one anticipates a reversion to the mean once the initial shock subsides.

We also cannot ignore silver’s strong industrial demand fundamentals, which provide a floor for the price. With global demand for solar panel manufacturing up 12% year-over-year according to the latest Q1 2026 industry reports, a sustained price drop may be limited. This underlying demand suggests any geopolitically induced weakness below key technical levels might be met with strong buying from industrial consumers.

Commerzbank’s Thu Lan Nguyen says EUR/USD gains may be limited in the short term because markets may be pricing in too strong an ECB response to the latest inflation shock. She adds that FX markets are likely to focus on near-term central bank reactions.

She notes the euro and the British pound have been steadier against the US dollar than in 2022, linked to expectations of faster policy tightening by the ECB and the Bank of England. She also states that the bank has previously questioned market expectations for the ECB, which limits the scope for further EUR/USD rises over the near term.

Near Term Focus For Central Banks

Over a longer horizon, she says currency performance may depend on which economies return towards the 2% inflation goal faster. She points to risks for the US dollar, citing firmer inflation related to rises in import tariffs and the possibility that actions by the US government could restrict the US central bank’s ability to respond to an inflation shock.

The article notes it was produced using an AI tool and checked by an editor.

In the immediate term, we see limited upside for EUR/USD as the market has likely gotten ahead of itself. Expectations are high that the European Central Bank will react aggressively to the latest inflation shock. This sentiment is capping any significant gains for the Euro against the Dollar.

The latest Eurozone inflation data for March showed a reading of 3.1%, fueling bets for quicker policy tightening. However, recent commentary from ECB officials has remained cautious, highlighting risks to economic growth and stressing a data-dependent path. This suggests the market’s hawkish positioning may be premature, creating an opportunity for traders.

Longer Term Risks For The Dollar

Derivative strategies that profit from EUR/USD staying within a range or drifting slightly lower could be effective in the coming weeks. Selling out-of-the-money call options or establishing bear call spreads could capitalize on the view that the Euro’s rally is overdone for now. These positions would benefit if the currency pair fails to break through key resistance levels.

This is a stark contrast to the environment we saw back in 2022, when markets were confident the US Federal Reserve would lead the charge against inflation. Today, markets seem to trust the ECB and Bank of England to have learned from the past and to act more swiftly. This belief is what has helped support the Euro and Pound recently.

Looking beyond the next few weeks, however, we believe the dollar faces more substantial risks. US inflation has remained stubbornly firm, with the latest core CPI coming in at 3.5%, partly due to significant import tariffs introduced last year. Over the long term, currencies where inflation returns to the 2% target more quickly will prove to be the most robust.

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Germany’s Producer Price Index (PPI) rose by 2.5% month-on-month in March. This was above the forecast of 1.4%.

The data indicates producer prices increased faster than expected during the month. The report provides a snapshot of price changes at the producer level in Germany.

Implications For Inflation And Ecb Policy

This morning’s German producer price data came in much hotter than expected, signaling that inflationary pressures are not fading as we had hoped. This places significant pressure on the European Central Bank to reconsider its previously neutral stance on interest rates. Consequently, the market is now pricing in a much more hawkish path for the ECB through the remainder of 2026.

We believe the most direct response is to anticipate higher interest rates for longer, making short positions on German bond futures attractive. The yield on the German 10-year Bund has already jumped 12 basis points to 2.95% on the news, its highest level this year. We are positioning for this trend to continue by selling Euribor futures contracts, as the probability of an ECB rate cut by September has now collapsed from 60% to below 15%.

This inflation surprise should provide a tailwind for the euro, particularly against the U.S. dollar, where recent data has shown a slight economic slowdown. We are buying EUR/USD call options with expirations in the third quarter to capitalize on this expected policy divergence. The pair has already pushed through the 1.1050 resistance level, and foreign exchange option markets show a growing bias for further euro strength.

For equities, this is a clear headwind, as higher borrowing costs will pressure corporate earnings. Looking back, we saw how the DAX index dropped nearly 15% during the initial inflation shock of 2022, a period of similar uncertainty. Therefore, we are buying put options on the DAX, as the European VSTOXX volatility index has spiked 18% today, indicating traders are bracing for increased market turbulence.

Positioning And Market Risks

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Germany’s Producer Price Index (PPI) year on year rose to -0.2% in March. This compares with -3.3% in the previous reading.

The data shows producer prices were still lower than a year earlier, but the fall was smaller. The change from -3.3% to -0.2% marks a 3.1 percentage point move.

Implications For Inflation Outlook

This sharp jump in German producer prices, from a deep negative to nearly flat, is a significant signal for us. It suggests the deflationary pressures we saw throughout 2025 are ending much faster than anticipated. We must now adjust our view that European inflation has been fully contained.

This data makes it much harder for the European Central Bank (ECB) to justify any near-term interest rate cuts. We should therefore reduce our exposure to positions that would benefit from lower rates. The market is now likely to price out the possibility of a rate cut before the fourth quarter of this year.

This producer price report is particularly impactful as it follows last week’s Eurozone HICP data, which showed core inflation remained sticky at 2.7%. The combination of rising producer costs and persistent service inflation suggests a renewed upward trend. We believe this is the start of a new inflationary impulse for the European economy.

In the coming weeks, we should consider selling interest rate futures, such as those on the German Bund, to position for higher yields. Options strategies that profit from rising interest rate volatility also look attractive now. We see this as an opportunity to get ahead of a wider market repricing of ECB policy.

Currency And Asset Market Positioning

For currency markets, this data is supportive of the Euro. A more hawkish ECB relative to other central banks should strengthen the currency. We are looking at buying EUR/USD call options, as the interest rate differential is likely to move in the Euro’s favor.

We remember how quickly the ECB had to pivot to hiking rates back in 2022 when inflation surprised to the upside. After a year of disinflation in 2025, policymakers will be especially sensitive to signs of a resurgence. They will not want to be seen as falling behind the curve a second time.

On the equity front, this development introduces a risk for the DAX index. Higher input costs could squeeze corporate profit margins, while the prospect of higher-for-longer interest rates presents a headwind for stock valuations. We should consider purchasing put options on the DAX to hedge our long equity exposure.

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GBP/USD pared some losses after opening with a gap down, but stayed lower near 1.3500 in Asian trading on Monday. The US Dollar found support from safe-haven demand linked to renewed US–Iran tensions.

The Guardian reported that Iran’s Foreign Ministry spokesman Esmail Baghaei said a US blockade of Iran’s ports and coastline is aggression that violates the ceasefire. He said it amounts to collective punishment, and described it as a war crime and crimes against humanity.

Market Reaction And Price Action

The pair moved further from a two-month high near 1.3600 reached on Friday. It recovered a few pips from a one-week low set in early Asian trade, and was still down over 0.15% on the day.

Risk sentiment weakened amid tensions over the Straight of Hormuz. Iran closed the waterway after briefly opening it over the weekend, alongside a US naval blockade of Iranian ports.

The developments reduced expectations for further peace talks. The current ceasefire is due to end on 22 April.

We are seeing a familiar pattern as geopolitical risk drives a flight to the safe-haven US Dollar, much like we observed during the Middle East flare-up in April 2025. This move is pressuring GBP/USD and we should anticipate further strength in the dollar index (DXY), which has already pushed past the 106.00 mark recently. Derivative traders should be positioned for a risk-off environment to persist in the short term.

Options And Volatility Signals

The looming April 22 ceasefire deadline is a significant catalyst for a spike in market volatility. During a similar escalation last year, the VIX index, which measures expected market volatility, jumped by nearly 25% in just a few days. Therefore, buying GBP/USD put options offers a direct way to hedge against a breakdown in talks and a subsequent sharp move lower in the currency pair.

The closure of the Strait of Hormuz is a critical factor, as nearly 20 million barrels of oil, or about 20% of global consumption, pass through it daily. A sustained blockage could drive Brent crude prices back over $100 per barrel, creating an inflationary shock that complicates the Bank of England’s policy. While this could argue for a hawkish central bank, the immediate safe-haven demand for the dollar is the dominant trading theme.

We should also monitor the options market, particularly the skew in GBP/USD risk reversals, which currently show a growing premium for puts over calls. This indicates that market participants are actively buying downside protection against a fall in the pound. This growing bearish sentiment could be exploited by setting up trades like bear call spreads, which would profit if the pair remains below a certain level like 1.3600.

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USD/CAD held near 1.3700 in late Asian trading on Monday, keeping Friday’s rebound in place. The move came as renewed doubts about the US–Iran temporary ceasefire supported demand for the US Dollar.

The US Dollar Index (DXY) rose 0.1% to about 98.30. Iran said it will not restart talks with the US, referring to “excessive demands, unrealistic expectations, constant shifts in stance, repeated contradictions, and the ongoing naval blockade”.

Canadian Inflation Data In Focus

In Canada, markets are watching March Consumer Price Index (CPI) data due at 12:30 GMT. Headline CPI is forecast to rise 1.1% month-on-month, up from 0.5% in February.

USD/CAD was marginally higher around 1.3700 at the time of writing. It remained below the 20-day exponential moving average at 1.3780, which kept the near-term bias negative.

The Relative Strength Index stood at 38.8, close to oversold levels. Resistance is at 1.3780, while support is near 1.3650 and then 1.3530 if 1.3650 breaks.

The technical section was produced with help from an AI tool.

Looking Back And Reframing The Drivers

We remember this time last year, in April 2025, when USD/CAD was hovering around 1.3700. The focus then was on US-Iran tensions boosting the dollar’s safe-haven appeal, even as we awaited a hot Canadian inflation report. It was a market driven by geopolitical fear more than economic data.

Today, the situation has evolved, with the pair now trading much firmer near 1.3950. The primary driver is no longer just a flight to safety but a clear divergence in central bank policy that has become more pronounced over the past year. We are now seeing the US Federal Reserve hold rates steady while the Bank of Canada signals potential cuts.

This policy gap is backed by recent data showing Canadian CPI for March 2026 came in at just 0.3% month-over-month, below expectations and slowing the annual rate to 2.1%. In contrast, the latest US inflation figures remain sticky above 3.5%, giving the Fed little room to ease policy. This fundamental divergence suggests continued strength for the US dollar against the loonie.

For derivative traders, this environment supports strategies that profit from a continued upward grind in USD/CAD. Buying call options with a strike price around 1.4050 for the coming weeks offers a way to capitalize on this momentum. This allows for upside exposure while defining the maximum risk to the premium paid.

Given that one-month implied volatility has ticked up to 8.5% on this policy uncertainty, outright calls can be expensive. A more cost-effective approach would be a bullish call spread, such as buying the 1.4000 call and selling the 1.4150 call. This strategy caps potential gains but significantly reduces the initial cash outlay.

We must also consider risks that could reverse the trend, such as a surprisingly strong Canadian jobs report or a sudden dovish shift from the Fed. Traders looking to hedge long Canadian asset exposure could consider buying put options below the 1.3800 level. This would offer protection if the recent support levels fail to hold and the pair reverses course.

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