EUR/USD fell back from last week’s peak near 1.1740 on Monday, but stayed in the upper 1.1600s. It traded at 1.1685 and found support earlier at 1.1670.

Oil prices rose after peace talks between the US and Iran failed and the US said it would block the Strait of Hormuz, which lifted demand for the US Dollar. The Euro’s decline has remained limited so far.

Oil Shock And Currency Reaction

Brent crude traded just above 100 USD per barrel, while EUR/USD slipped below 1.17. Implied EUR/USD volatility was described as staying comparatively low while markets expect de-escalation.

With a light economic calendar, headlines from Iran are expected to keep moving markets. On Tuesday, attention turns to ECB President Christine Lagarde ahead of the April 30 policy decision.

EUR/USD held above the 1.1630 area and its wider trend was described as positive. The RSI was around the mid-50s and the MACD stayed close to the zero line.

Resistance was placed at 1.1725–1.1735, then 1.1825, and near 1.1930. Support levels were 1.1670, 1.1630–1.1640, and a rising trend support near 1.1590.

Then And Now

We remember this time in 2025 when tensions in the Strait of Hormuz pushed oil over $100 a barrel. The Euro held surprisingly firm against the dollar, trading near 1.17 despite the flight to safety. That period showed us that geopolitical risk does not always crush the Euro if markets are hoping for a quick resolution.

Today, on April 13, 2026, the situation is quite different. With Brent crude trading more calmly around $87 per barrel and a fragile truce holding in the Middle East, the geopolitical premium has mostly vanished. The EUR/USD pair is now trading much lower, near 1.0850, driven more by central bank policy divergence than by conflict.

Implied volatility was a key indicator then, and it remains so now. While volatility was considered low in April 2025, the underlying risk was high; today, the CBOE EuroCurrency Volatility Index sits near a multi-year low of 6.2, reflecting genuine market quiet. This makes buying options, such as straddles or strangles, relatively cheap to position for any unexpected disruption.

Last year, we were watching ECB President Lagarde for hints on managing an inflation shock from oil. Now, the focus is squarely on the divergence between the ECB and the Federal Reserve, with the ECB signaling a more aggressive rate-cutting cycle. This fundamental pressure is what is keeping a lid on any Euro rallies, unlike the resilient price action we saw in 2025.

Considering the low volatility and the bearish fundamental outlook, selling out-of-the-money call spreads on EUR/USD could be an effective strategy. This allows us to collect premium while betting that the pair will not break significantly higher, a direct contrast to the bullish trend we saw in early 2025. The 1.1000 level, which acted as support in late 2025, now looks like a formidable resistance ceiling for the coming weeks.

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DBS Group Research said stagflation risks are expected to shape discussions at the IMF and World Bank Spring Meetings in Washington, D.C., after a US move involving the Strait of Hormuz. It said the IMF World Economic Outlook (WEO), due on 14 April, is likely to cut global growth forecasts.

The report described President Donald Trump ordering the US Navy to blockade the Strait of Hormuz by stopping vessels in international waters that paid Iran a toll for safe passage. It also referred to Trump’s 17 March address in which NATO and Asian security partners were called “free riders” who did not “share the burden”.

Stagflation Risks And Global Policy Focus

It said the action followed a US Supreme Court ruling that removed Trump’s ability to use the International Emergency Economic Powers Act (IEEPA) for broad-based tariffs. The report said the administration is instead using energy security measures aimed at trade deficit partners in Europe and Asia.

It said Asia may be the most exposed region because of heavy reliance on Hormuz-linked industrial inputs. IMF Managing Director Kristalina Georgieva said prices may take time to return to levels seen before Operation Epic Fury began on 27 February.

Looking back at the turmoil of early 2025, we saw how the Strait of Hormuz blockade triggered the exact stagflationary shock many feared. The disruption, which began with Operation Epic Fury, caused a massive energy price spike that rippled through the global economy. This is a crucial backdrop for our current market positioning.

The CBOE Volatility Index (VIX) surged above 40 in April 2025, reflecting deep market uncertainty as the IMF downgraded its global growth forecast. As predicted, Asian economies were hit hard, with Japan and South Korea entering technical recessions in the second half of last year. US inflation, measured by CPI, subsequently peaked at 5.9% in the third quarter of 2025.

Positioning For Volatility And Range Bound Markets

Central banks were caught in a bind, forced to raise interest rates throughout the second half of 2025 to combat the supply-side inflation. This decision, while necessary to tame prices, further squeezed economic activity, particularly in manufacturing. We are still living with the consequences of those policy choices today.

Today, with inflation still stubbornly above the Fed’s target and growth anemic, the path for monetary policy remains highly uncertain. This environment makes options on short-term interest rate futures particularly compelling. They offer a way to trade the ongoing debate between further hikes to crush inflation or potential cuts to stave off recession.

We are also seeing elevated volatility in energy markets, even a year after the initial crisis. Brent crude prices, which briefly touched $140 per barrel last year, have settled but remain jumpy around $92 on any new geopolitical headline. Using long-dated call and put spreads on crude oil futures can help manage exposure to these persistent price swings.

This stagflationary echo also suggests equity indices may remain range-bound for some time. We are therefore positioning using strategies like iron condors on the SPX. This approach allows us to profit from a lack of strong directional movement and continued high implied volatility.

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Turkey recorded a current account balance of $7.501bn in February. This was above expectations of -$7.5bn.

The February current account data is a game-changer, showing a massive $15 billion swing from the expected deficit to a strong surplus. This is the clearest sign yet that the orthodox economic policies we have seen implemented over the last couple of years are finally delivering structural improvements. For the coming weeks, we must position for a fundamentally stronger Turkish Lira (TRY).

This positive flow drastically reduces pressure on the currency, a stark contrast to the persistent deficits we saw through 2025. With the central bank’s net reserves recently turning positive for the first time in years, reaching over $15 billion, the firepower exists to support this strength. We should be looking at derivatives that benefit from USD/TRY moving lower, potentially targeting a break below the 40.00 level through call spreads or by selling out-of-the-money puts.

A stable currency will likely trigger a new wave of foreign investment into Turkish equities. The BIST 100 index, which saw gains of over 90% in 2024, could see another significant leg up as currency risk subsides for offshore funds. We should consider buying BIST 100 index futures or call options to capture this potential upside momentum.

This surplus also gives the central bank significant flexibility, shifting the market narrative from rate hikes to the timing of eventual rate cuts. This implies that the extreme risk premium embedded in Turkish assets should decrease, making it attractive to sell volatility on the lira. Selling short-dated USD/TRY strangles could be an effective way to capitalize on a period of newfound, and surprising, stability.

Turkey’s current account balance recorded a deficit of $-7.501bn in February.

This was below the expected deficit of $-7.5bn.

Current Account Deficit Signals External Pressure

The February current account deficit came in slightly worse than expected, confirming the ongoing pressure on Turkey’s external finances. This reinforces the view that more foreign currency is leaving the country than entering. This trend puts a strain on the nation’s reserves and the value of its currency.

We anticipate this will add to the steady weakening of the Turkish Lira. Derivative traders should consider positioning for a higher USD/TRY exchange rate, as the Lira has already depreciated over 8% since the start of 2026. Looking at options, an increase in demand for USD calls is a likely outcome in the coming weeks.

This data makes it nearly certain that the Central Bank of the Republic of Turkey (CBRT) will maintain its high policy rate, which we saw them hold at 48% in their last meeting. Looking back to 2025, we saw how the central bank had to keep rates elevated throughout the year to combat similar pressures. Any thought of a rate cut is now firmly off the table for the near future.

The combination of a weak currency and high interest rates creates a difficult environment for Turkish stocks. Traders might use this as an opportunity to hedge portfolios by purchasing put options on the BIST 100 index. Recent statistics show foreign investor outflows from the Istanbul stock exchange have already accelerated in the first week of April 2026.

This pattern is familiar to us from the market behavior we observed in 2025, where widening deficits consistently preceded periods of Lira weakness. With the latest March 2026 inflation figures still stubbornly high at an annual rate of 55%, the fundamental case for a weaker Lira remains strong. This deficit figure will only add to that conviction.

Implications For Lira Rates And Equities

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BoJ Governor Kazuo Ueda said Japan’s economy is recovering moderately, but some weakness remains due to the Middle East conflict. He said underlying inflation is gradually accelerating towards the Bank of Japan’s target, and both growth and prices are broadly in line with forecasts.

Ueda said financial markets have been unstable because of the conflict, and inflation faces risks on both sides. He said higher oil prices can weigh on Japan’s economy by worsening the terms of trade, and that rising inflation expectations could lift underlying inflation.

Market Reaction And Policy Context

There was no immediate market impact, with USD/JPY up 0.3% to about 159.70. The BoJ is Japan’s central bank and aims for inflation of around 2%.

In 2013 it began ultra-loose policy using Quantitative and Qualitative Easing, including buying assets to add liquidity. In 2016 it introduced negative rates and controlled the 10-year government bond yield, then in March 2024 it lifted interest rates, moving away from the ultra-loose stance.

BoJ stimulus weakened the Yen, with the fall deepening in 2022 and 2023 as other central banks raised rates sharply. The move away from ultra-loose policy in 2024 partly reversed that trend, after inflation rose above 2% alongside a weaker Yen and higher global energy prices, with rising salaries also a factor.

The Bank of Japan is signaling it will not rush to raise interest rates further, creating a clear path for traders. Governor Ueda’s comments emphasize a cautious approach, meaning the wide interest rate gap between Japan and other countries will likely remain. This fundamental factor has been the primary driver of yen weakness for years.

Implications For Traders

This patient stance is supported by the latest data, which shows Japan’s core inflation for March 2026 at a manageable 2.1%. In contrast, persistent inflation in the United States has kept the Federal Reserve’s policy tight. This policy divergence is the key reason we see continued pressure on the yen.

Looking at the markets, the USD/JPY pair is trading near 162.50, continuing the trend we saw develop through 2025. While we remember the Ministry of Finance’s currency interventions that year, they only provided temporary relief. The underlying weakness of the yen persists as long as the interest rate differential is so significant.

The conflict in the Middle East adds another layer of complexity, pushing Brent crude prices above $95 a barrel. This weighs on the Japanese economy but also introduces the risk of higher inflation, just as Ueda mentioned. This uncertainty suggests that implied volatility on yen currency options may be an attractive trade.

For derivative traders, this environment reinforces the appeal of buying USD/JPY call options. This strategy allows for capitalizing on potential further yen depreciation while limiting downside risk. Given the BoJ’s gradual approach, contracts with expiries of three to six months could be well-positioned.

Considering the warnings about “unstable movements,” volatility-based strategies should also be considered. We recall how yen pairs moved sharply during the 2025 spring wage negotiations. Purchasing option straddles ahead of the next Bank of Japan meeting could be a way to profit from a larger-than-expected market move in either direction.

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Donald Trump announced a blockade of the Strait of Hormuz after US–Iran talks in Pakistan ended without a deal following a 21-hour session. Brent rose 9% to US$103 per barrel, risk assets fell, the Dollar strengthened, and Asian currencies weakened.

US Central Command later said enforcement would be narrower than a full closure. Even so, how it would work in practice, including checking where vessels come from, remains unclear.

Diplomatic Context And Market Shock

The weekend talks were the highest level of US–Iran diplomatic contact in four decades. Iran sent a large delegation that included economic officials such as the central bank governor.

Reports said the second day moved into technical and expert-level meetings. This suggests the discussions went beyond general statements.

Three oil supertankers crossed the Strait over the weekend, carrying about 6 million barrels. This was described as the largest non-Iranian tanker flow since the Iran/Middle East conflict began.

Future tanker movements will depend on whether hostilities restart and how any blockade is enforced, including whether Chinese ships carrying Iranian oil would be stopped. The article was produced with help from an AI tool and reviewed by an editor.

Volatility The Primary Focus

Given the events over the weekend, we see Brent crude’s jump to US$103 as just the initial reaction. The CBOE Crude Oil Volatility Index (OVX) has surged to 65, a level not seen since the initial energy shock of early 2022, signaling extreme uncertainty. For traders, this means the price of options has become expensive, but the risk of even larger price swings remains very high.

The primary focus should be on volatility rather than outright direction in the immediate term. With enforcement of the blockade unclear, straddles or strangles on Brent futures could be effective ways to trade the expected sharp price movements, regardless of whether they are up or down. We believe the coming days will bring higher realized volatility than what is currently implied, as the first naval interactions are reported.

We are closely monitoring tanker-tracking data, which confirms that while a few supertankers passed, overall traffic through the Strait has slowed by 40% in the last 48 hours. This channel accounts for over 20% of global oil consumption, so any sustained disruption will fundamentally tighten the market. This physical reality underpins the upside risk to prices, even with the diplomatic efforts.

A key trade we are watching is the widening of the Brent-WTI spread, which has already gapped out to over $9. The blockade directly threatens Brent-priced barrels while leaving US-based WTI largely unaffected, suggesting this premium has further to run. We are also seeing significant stress on the currencies of major energy importers, with the USD/JPY cross pushing past 155 as Japan’s energy security is questioned.

This situation feels more precarious than the tensions we saw building throughout 2025, which were mostly rhetorical. The fact that high-level, serious negotiations were happening right before this action introduces a unique dynamic of hope and fear into the market. This suggests that any positive news, such as a diplomatic walk-back, could cause a sharp correction in oil prices.

The critical question is how the US will handle tankers heading to China, which has continued to import Iranian oil. If a Chinese-flagged vessel is challenged, we can expect another significant leg up in crude prices and a sell-off in risk assets. Conversely, if these tankers are allowed to pass, it will signal the blockade is porous and the current $100+ price may not be sustainable.

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NZD/USD rose after opening with a gap down and traded near 0.5830 in Asian hours on Monday. The daily chart shows the pair remains within an ascending channel.

The 14-day RSI is just above 51, suggesting mild upward momentum without a clear break. Price is still held below the longer EMA.

Range Bound Technical Picture

The pair is between the nine-day EMA and the 50-day EMA, keeping trading mostly range-bound. Resistance is at 0.5843, then near 0.5900 at the channel top.

If price breaks above the channel, it may move towards 0.6094, a level last seen in July 2025 and reached on 29 January. Support is at the nine-day EMA near 0.5797, then around 0.5740 at the channel base.

A fall below the channel could open the way to 0.5681, the lowest in nearly five months, set on 6 April. The technical analysis was produced with help from an AI tool.

Given the NZD/USD is caught in a narrow range, we see this as a time for patience or range-bound strategies. The pair is pinned between its nine-day EMA support at 0.5797 and resistance from the 50-day EMA at 0.5843. This indecision is reflected in the market, with implied volatility on one-month options dropping to just 8.2%, its lowest level this quarter.

For those with a bullish outlook, the recent strength in commodity prices offers a fundamental reason for optimism. We’ve noted that last week’s Global Dairy Trade auction showed a 2.1% increase in whole milk powder prices, providing a supportive backdrop for the Kiwi dollar. A decisive move above 0.5843 could be a trigger to buy call options, targeting a retest of the upper channel boundary near 0.5900.

Options Strategy Considerations

Conversely, we must consider the risk of a breakdown, especially with the US Federal Reserve maintaining a hawkish tone. Should the pair lose the 0.5797 support level, the next critical test is the channel’s lower boundary around 0.5740. A breach here could see traders purchase put options, anticipating a slide toward the April 6th low of 0.5681.

With the RSI hovering near 51, indicating a lack of strong momentum, strategies that profit from consolidation could be effective. Options traders might consider selling a strangle or setting up an iron condor with strikes placed outside the 0.5740 to 0.5900 range. This approach benefits from the price staying within this channel over the next few weeks.

Looking back, we saw a similar period of consolidation during the fourth quarter of 2025 before the sharp rally to the January 29th high of 0.6094. That historical move serves as a reminder that these periods of low volatility can precede a significant breakout. Therefore, setting alerts at the key support and resistance levels is critical for capturing the next major move.

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Equity markets were expected to open more than 1% lower, tracking losses in Asia after US-Iran talks failed. Brent crude also gapped higher, opening above US $100 per barrel on Monday morning.

European indices were expected to fall after outperforming on Friday. US markets ended Friday lower, with the S&P 500 down 0.1% and high-yield credit down 0.4%, despite solid inflation figures.

European Markets Brace For Catch Down

In Europe, the Stoxx 600 closed up 0.4% and the OMX Nordic rose 1.3% on Friday. This raised expectations of a “catch-down” move in Europe as markets reacted to the weekend news.

In the US on Friday, technology was among the best performing sectors, although software shares kept falling. Semiconductor shares were reported as strong enough to offset that weakness.

Materials and real estate performed well, while defensive sectors such as health care and staples fell. Equities and equity futures were lower, and the US dollar was slightly stronger.

We recall how markets reacted in early 2025 when the breakdown in US-Iran talks triggered a risk-off opening, gapping Brent crude higher and sending equity futures tumbling. That event provides a useful template for the market’s sensitivity to geopolitical flare-ups in oil-producing regions. The immediate flight to safety in the US dollar was a key feature.

Derivatives Strategies For Oil Shock Risk

Given the renewed tensions surrounding upcoming OPEC+ production negotiations, we see a similar pattern of risk emerging. The U.S. Energy Information Administration (EIA) recently reported that global petroleum inventories are sitting 3% below their five-year average, making the market exceptionally vulnerable to supply shocks. This tight supply backdrop amplifies the potential impact of any single headline.

Derivative traders should therefore consider positioning for a spike in volatility. With the VIX currently hovering near a multi-month low of 16, buying call options is an inexpensive way to hedge against or profit from a sudden market downturn. We saw the VIX jump over 25% in a single day during a similar scare in 2024, highlighting the explosive potential.

The energy market itself offers a direct play on these rising tensions. With Brent crude currently trading around $94 a barrel, long positions in near-term futures contracts or the purchase of call options can provide direct exposure to a potential price surge toward the $100 mark. History shows that geopolitical events in the Persian Gulf can add a $10-$15 risk premium to oil prices in a very short period.

However, we also remember from the 2025 event that underlying sector strength can persist, particularly in cyclicals like semiconductors. A sophisticated trade could involve buying puts on defensive ETFs like the XLU for utilities, while simultaneously buying calls on tech or materials ETFs. This expresses a view that even with headline risk, the core economic appetite for growth remains intact.

A flight to safety will almost certainly strengthen the US dollar, which has been consolidating near 105 on the DXY index. For those with international exposure, buying call options on the UUP ETF can act as an effective portfolio hedge. This move would mirror the dollar’s appreciation seen during previous risk-off episodes.

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Most Asian equity indices fell on Monday after US–Iran peace talks ended without an agreement, and President Donald Trump said the US military will enforce a blockade in the Strait of Hormuz. Japan’s Nikkei 225 fell 0.8%, South Korea’s KOSPI dropped 0.85%, and Hong Kong’s Hang Seng slid 1.16%, while China’s Shanghai Composite was almost flat.

European stock futures were mixed, and US futures pointed to a lower open on Wall Street. Oil prices rose again after Trump said the US would block all vessels from Iran from 10:00 Eastern time (14:00 GMT) on Monday, with the move aimed at pressuring China, the main buyer of Iranian oil.

Markets Focus On Strait Of Hormuz Risk

Trump said he did not care if Iran returns to talks, while a two-week ceasefire that began last Wednesday remains in place. This reduced further falls in equities.

Iranian authorities said a Strait of Hormuz blockade would breach the ceasefire, and the Revolutionary Guard said military vessels approaching the area would be “dealt with severely”. With a light economic calendar on Monday, Middle East updates are expected to drive markets.

We remember the market reaction in 2025 when the US-Iran peace talks collapsed and the Strait of Hormuz blockade was enforced. That event sent a shockwave through equity markets and caused a significant spike in oil prices. The subsequent weeks were defined by extreme volatility as markets priced in the risk of a wider conflict.

The blockade last year pushed Brent crude prices past $110 a barrel by the summer of 2025, feeding a surge in global inflation that central banks are still battling today. We saw the CBOE Volatility Index (VIX) consistently trade above 30 during that period, a stark contrast to the relative calm of early 2025. Maritime insurance premiums for passage through the Gulf tripled, disrupting supply chains far beyond just the energy sector.

Trading Ideas For Fragile Stability

As of today, April 13, 2026, the situation has stabilized but remains a key source of underlying risk. Tensions have eased following diplomatic efforts late last year, with oil now trading closer to $85 per barrel. The VIX has settled back to around 18, suggesting traders are less fearful of an immediate shock.

Given this backdrop of reduced but persistent tension, traders should consider strategies that benefit from this fragile stability. Selling out-of-the-money put credit spreads on broad market indices like the S&P 500 could capture premium from the remaining volatility. This strategy profits from time decay and sideways market movement, but requires defined risk management in case of a sudden flare-up.

For direct energy exposure, the implied volatility in oil options remains elevated compared to historical averages. Purchasing long-dated, out-of-the-money call options on oil ETFs like USO offers a low-cost way to hedge against a potential new conflict. This provides significant upside exposure while strictly limiting the capital at risk.

We must also watch for signs of renewed risk-off sentiment, which would benefit safe-haven assets. During the peak tensions in 2025, the Japanese Yen and US dollar saw substantial inflows. Any breakdown in the current diplomatic quiet would likely see a repeat of this flight to safety, creating opportunities in currency derivatives.

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Talks between the United States and Iran ended without agreement, after a two-week ceasefire in the conflict. The United States has threatened a complete blockade of the Strait of Hormuz.

A blockade would aim to stop even the limited shipping traffic currently allowed through the strait. This could worsen the global shortage of oil and gas in the short term.

Market Reaction And Key Levels

Market moves have been limited so far. Brent crude is trading just above 100 USD per barrel, and EUR/USD has fallen below 1.17.

These levels are away from the extremes seen earlier during the conflict. Implied EUR/USD volatility remains comparatively low.

Currency impacts may grow if the war intensifies again in the coming months. The article was produced with the help of an AI tool and reviewed by an editor.

We are seeing a disconnect in the market following the failure of US-Iran negotiations. The threat of a blockade in the Strait of Hormuz, a conduit for nearly 20% of global oil consumption, is not being fully priced in. Brent crude is currently holding around $104 per barrel, far below the $130 levels we saw during the initial energy shock of 2022.

Options And Volatility Positioning

This market calmness suggests traders still expect a diplomatic solution, keeping risk premiums unusually low. For instance, one-month implied volatility for EUR/USD is hovering around 6.5%, a level we haven’t seen since before these tensions began in 2025. This environment makes buying protection relatively cheap for those who anticipate a potential shock.

Considering the significant volume of energy that could be disrupted, purchasing out-of-the-money call options on Brent crude for the coming months could be a prudent strategy. These options are currently inexpensive and provide exposure to a sharp upward move if the Hormuz situation deteriorates. Similarly, the low volatility in the currency market presents an opportunity to acquire EUR put options at a discount.

Looking back at the initial ceasefire in late 2025, the market quickly priced in a best-case scenario, a pattern that appears to be repeating now. However, recent satellite data showing an increased naval presence near the Gulf of Oman suggests the underlying risk is growing. This indicates that current option pricing may not accurately reflect the potential for a sudden flight to the safety of the US dollar.

The primary risk for the market is a sharp repricing of volatility from these suppressed levels. A sudden escalation could trigger a rapid unwinding of complacent positions, leading to outsized moves in both energy and currency markets. Therefore, traders holding long volatility positions stand to benefit should the market’s hope for de-escalation prove to be misplaced.

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