AUD/USD traded higher near 0.6990 in early Asian trading on Monday. Market focus stayed on the US-Israel war with Iran. The US and Israel entered the third week of direct conflict with Iran. CNN reported US President Donald Trump said the US was not yet ready to make a deal with Tehran to end the war.

Conflict Escalation And Market Reaction

Israel’s military said it expects its campaign to continue for at least three more weeks. Tensions rose after the US struck Iranian military sites on Kharg Island, Iran’s main oil export hub, on Saturday. Iran responded by launching attacks on nearby countries, including targets in the United Arab Emirates and hubs in Iraq. Hezbollah said it carried out an attack targeting the US embassy in Baghdad. These events increased geopolitical uncertainty in the Middle East. Such conditions can support the US Dollar as a safe-haven currency. We remember that in early 2025, the direct conflict between the US, Israel, and Iran created significant safe-haven demand for the US Dollar. The attacks on oil infrastructure, particularly Kharg Island, injected massive uncertainty into energy markets. This initial shock is still influencing market psychology today.

Hedging Approaches For Elevated Volatility

The aftermath of that conflict has left inflation stubbornly high, with the latest US Consumer Price Index for February 2026 coming in at 3.8%, well above the Federal Reserve’s target. This persistent inflation is forcing markets to reconsider how soon the Fed might be able to lower interest rates. This uncertainty is a primary source of volatility for traders to manage. Oil markets remain particularly sensitive to any news from the Middle East. We saw WTI crude futures spike above $130 during the 2025 crisis, a surge reminiscent of the market reaction to the 2022 invasion of Ukraine. With WTI currently trading near $85, purchasing call options on oil futures could be a cost-effective way to hedge against any flare-ups in the coming weeks. For currency traders, the AUD/USD pair is caught between these forces. Lingering geopolitical risk favors the safe-haven USD, while the Australian dollar remains sensitive to any slowdown in global growth. Given this dynamic, buying put options on the AUD/USD can serve as a direct hedge against a sudden “risk-off” move in the market. Equity market volatility, as measured by the VIX, has settled around 19 but this is still elevated compared to historical averages before the 2025 conflict. This suggests underlying investor nervousness persists. We should consider using options strategies like collars on individual stock holdings or buying VIX calls to protect against a sudden market downturn. Interest rate derivatives will be critical as we navigate the Fed’s next moves. Fed Funds futures are now pricing in a 40% probability of another rate hike before July 2026 to combat the sticky inflation stemming from the 2025 energy price shock. Using interest rate swaps or options on Treasury futures can help manage exposure to an unexpectedly hawkish central bank. Create your live VT Markets account and start trading now.

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USD/JPY opened with a small gap lower and traded near 159.50. This followed comments from Japan’s Finance Minister Satsuki Katayama about the yen’s sharp fall, with a pledge to monitor markets and act against excessive volatility. Over the weekend, reports said the United States struck Iranian military sites on Kharg Island, Iran’s main oil export hub. Iran responded with attacks on targets in the United Arab Emirates and Iraq, and Hezbollah said it targeted the US embassy in Baghdad.

Geopolitical Risk And Strait Of Hormuz

Fighting continued around the Strait of Hormuz, with repeated attacks reported on both sides. US President Donald Trump used Truth Social to call on allies to help secure the route, while the Wall Street Journal reported a coalition is being formed, with debate ongoing on timing. On the 4-hour chart, USD/JPY stayed above rising 20-, 100- and 200-period SMAs, with the 20-period near 159.00. The 14-period Momentum remained above 0, while RSI was near 69, just below overbought. Support levels were cited at 159.00, then 158.50 and 158.00, with resistance near 160.00 and 160.50. The 200-period SMA was near 155.80, and a break below 158.50 was described as weakening the current structure. We should remember the sharp market reactions during the Middle East conflict in 2025, which created a clear playbook for risk-off events. Those events demonstrated how quickly geopolitical flare-ups can gap currency pairs and spike energy prices. Traders should therefore be hedging against sudden escalations, as tensions in the region remain a constant background threat.

Options Volatility And Intervention Risk

The risk of a sudden surge in oil prices, similar to what we saw in 2025, is a key concern for derivative traders. West Texas Intermediate (WTI) crude futures saw an 8% one-day volatility spike during recent OPEC+ meetings, reminding us how sensitive energy markets are to supply news. Any disruption could mirror the 2025 scenario, impacting inflation expectations and risk-sensitive currencies like the yen. We must pay close attention to the USD/JPY rate, especially as it approaches the 160.00 level that triggered verbal warnings from the Finance Minister back in 2025. Considering Japan’s Ministry of Finance spent a record ¥9.79 trillion on currency interventions in 2022 when the yen weakened past 150, the 160 level is now viewed as a hard line for potential action. This makes buying out-of-the-money JPY call options a relevant strategy for tail-risk events. Looking at the options market, implied volatility for the yen remains relatively subdued compared to the peaks seen during the 2025 tensions. The Cboe/CME FX Yen Volatility Index (JYVIX) is currently trading near 8.5, well below the highs of 12-13 seen during past intervention scares. This suggests that buying protection against a sudden, sharp appreciation of the yen could be relatively inexpensive right now. The fundamental picture is also critical, with Japan’s latest core Consumer Price Index (CPI) holding at 2.2%, just above the Bank of Japan’s target. This persistent inflation, driven partly by a weak yen, puts added pressure on authorities to prevent further currency depreciation. Any move by the central bank to normalize policy more quickly could cause a significant shock, reinforcing the case for being prepared for abrupt JPY strength. Create your live VT Markets account and start trading now.

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US energy secretary Chris Wright said he expects the US–Israel war with Iran to end within “the next few weeks”, and said it could end sooner. The Guardian reported his comments on Sunday. Wright said he expects oil supplies to rebound after the conflict ends. He also said he expects energy costs and prices to fall afterwards.

Energy Prices Expected To Fall

With the expectation that the conflict could end within weeks, we are anticipating a sharp decline in energy prices. This suggests a bearish stance on crude oil derivatives is warranted. The market has priced in a significant risk premium that may soon disappear. West Texas Intermediate (WTI) crude has been trading above $125 a barrel for the past month due to the conflict’s disruption of shipping lanes in the Strait of Hormuz. We saw the latest EIA report show a larger-than-expected crude inventory draw of 4 million barrels just last week. A return of normal supply flows would directly reverse this trend. We believe buying put options on major oil ETFs or shorting WTI futures contracts for May and June delivery are direct ways to position for this. These trades would profit directly from a drop in the underlying price of oil. The number of short positions in the market has grown by 15% in the last month, showing that this sentiment is growing. We saw a similar pattern back during the first Gulf War in 1991, when crude prices collapsed nearly 35% in a single day once the air campaign began and uncertainty was resolved. The buildup in oil prices we witnessed throughout 2025 was based on the threat of prolonged conflict. An end to that conflict logically unwinds that premium.

Volatility Could Drop Sharply

Implied volatility in the energy sector has been extremely elevated, with the Cboe Crude Oil Volatility Index (OVX) hovering near 60. An end to hostilities would likely cause this volatility to collapse, making strategies like selling call credit spreads attractive. This allows us to profit not just from falling prices but also from the decrease in market uncertainty. Create your live VT Markets account and start trading now.

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New Zealand electronic card retail sales rose by 1.5% year on year in February. This was up from 0.4% in the previous period. The release time was 03/15/2026 21:45:04 GMT. The data covers February.

Consumer Demand Remains Resilient

This morning’s electronic card sales data for February shows a jump to 1.5% year-on-year, significantly up from the previous 0.4%. This suggests consumer demand in New Zealand is proving more resilient than many had anticipated. For us, this challenges the narrative that the Reserve Bank of New Zealand (RBNZ) would be in a hurry to cut interest rates. Given that the RBNZ has held the Official Cash Rate at a restrictive 5.50% to combat inflation, this spending data will concern them. We saw quarterly inflation in the last part of 2025 print at 3.8%, still stubbornly above the central bank’s 1-3% target range. Stronger consumer activity will only add to these underlying price pressures in the economy. In the coming weeks, we should consider positioning for a stronger New Zealand dollar. The market has been pricing in potential rate cuts for the second half of 2026, but this data makes that less likely. We can express this view by buying NZD/USD call options or selling out-of-the-money puts to gain upside exposure. Looking back, we saw a similar situation in mid-2025 when a surprisingly strong jobs report caused a sharp repricing of rate expectations and a subsequent rally in the Kiwi dollar. That event showed how sensitive the currency is to data that contradicts the rate-cutting narrative. We should expect a similar dynamic to play out now. This shift in outlook also impacts the interest rate markets directly. Derivatives tied to the Official Cash Rate, such as overnight index swaps, will need to be repriced to reflect a lower probability of easing. We should look to unwind positions that were betting on imminent cuts and consider trades that profit from rates staying higher for longer.

Volatility And Rates Repricing

Be aware that implied volatility on NZD options will likely increase. Recent business confidence surveys have been lukewarm, so this strong consumer data creates conflicting signals for the economy. This divergence points to a period of greater uncertainty and price swings. Create your live VT Markets account and start trading now.

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New Zealand’s electronic card retail sales rose by 1.4% month-on-month in February. This followed a fall of 1.1% in the previous month.

Stronger Consumer Demand Signal

The recent jump in New Zealand’s electronic card sales, from a 1.1% decline to a 1.4% increase, is a significant bullish indicator for the economy. This data points to stronger consumer resilience than we had been anticipating for the first quarter of 2026. It directly challenges the narrative of a rapidly cooling economy that many had priced in. This surprising consumer strength will likely force a re-evaluation of the Reserve Bank of New Zealand’s monetary policy path. We believe the market will quickly price out any remaining probability of an interest rate cut in the first half of the year. The central bank has less reason to ease policy if domestic demand is proving this robust. To make this view more credible, we note that the latest quarterly inflation figures from Stats NZ showed headline CPI at 4.7%, which remains well above the RBNZ’s 1-3% target band. This persistent inflation, combined with renewed consumer spending, gives the central bank a decidedly hawkish tilt. This situation is reminiscent of the stubborn inflation we observed throughout much of 2025, a period where markets incorrectly anticipated rate cuts. Looking back to 2025, we saw the NZD/AUD cross-rate climb significantly when Australian inflation cooled faster than New Zealand’s, creating a policy divergence. Historical data from that period shows the Kiwi dollar can outperform when our central bank is perceived as more hawkish than its peers. We may be seeing the beginning of a similar pattern now. Therefore, we see value in positioning for a stronger New Zealand dollar in the coming weeks. We are considering buying NZD/USD call options to capture potential upside with defined risk. This strategy allows us to profit if the currency appreciates on the back of shifting interest rate expectations.

Rates Market Implications

For interest rate traders, this data suggests short-term yields are likely to rise as rate cut expectations evaporate. We should consider selling New Zealand 90-day bank bill futures. This position would profit as the market adjusts to the reality of higher-for-longer interest rates. Create your live VT Markets account and start trading now.

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New Zealand’s BusinessNZ Performance of Services Index (PSI) fell to 48.0 in February. It was 50.9 in the previous month. A PSI reading below 50 indicates a contraction in service sector activity. A reading above 50 indicates expansion.

Services Contraction Signals Broader Weakness

The drop in the services index to 48 shows the New Zealand economy is contracting, a notable shift from the start of the year. This reading complicates things for the Reserve Bank, as we’re still seeing inflation running stubbornly high at 4.1% in the latest quarterly data. The central bank is now caught between its mandate to fight inflation and the need to support a weakening economy. We believe the market will begin pricing in a higher probability of an Official Cash Rate cut later this year, despite the RBNZ’s firm stance. With the unemployment rate recently ticking up to 4.2%, the case for the RBNZ to hold rates steady at 5.5% is weakening by the day. This is a clear change from the narrative through much of 2025, when the debate was centered on the possibility of another hike. This weaker economic outlook should put significant downward pressure on the New Zealand dollar in the coming weeks. We see a strong case for shorting the kiwi against the US dollar, as the US economy continues to show more resilience. Looking back at the 2020 downturn, the NZD has historically underperformed when the RBNZ pivots towards cutting interest rates. The contraction in services, which represents over two-thirds of the economy, is a direct negative signal for corporate earnings and the NZX 50 index. We would consider buying put options on the index to protect against or speculate on a potential market decline. Companies exposed to domestic consumer spending will be particularly vulnerable to this slowdown. Finally, the conflicting data of slowing growth alongside high inflation is a recipe for increased market volatility. This uncertainty surrounding the RBNZ’s next policy move creates opportunities for traders using options strategies. Positioning for larger price swings, rather than a specific direction, could be a prudent approach over the next few weeks.

Volatility And Policy Uncertainty

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US President Donald Trump called on allies on Saturday to help secure the Strait of Hormuz. The Wall Street Journal reported that the White House plans to announce that several countries have agreed to form a coalition to escort ships through the corridor. In a Truth Social post, Trump said “many countries” affected by Iran’s attempted closure of the strait would send warships with the United States to keep it open and safe. He listed China, France, Japan, South Korea and the UK among countries he wanted to take part.

Coalition Talks And Escort Timing

The Wall Street Journal said talks are continuing about the timing of any operations. It reported that discussions include whether escorts would begin before or after hostilities end. Iran’s media operations centre warned residents in Dubai and Doha of possible attacks in the coming hours, according to Iran Press TV. It claimed US military personnel are based in those locations. With nearly a fifth of the world’s daily oil supply passing through the Strait of Hormuz, we must anticipate a sharp spike in crude prices. We should be looking at buying call options on WTI and Brent futures, as this provides upside exposure if the situation worsens. This strategy allows us to profit from rising prices while limiting our maximum loss to the premium paid for the options. The escalating threats create significant market uncertainty, which means volatility is likely to rise. We should consider purchasing call options on the VIX, which historically moves opposite to the S&P 500 during periods of fear. We saw a similar dynamic during the flare-ups in 2019 and 2022, where even the threat of conflict sent volatility indexes soaring before any actual shots were fired.

Portfolio Hedges And Energy Upside

Higher energy costs act as a tax on the global economy and can hurt corporate profits, especially for transportation and industrial companies. To hedge our portfolios, we should consider buying put options on broad market indices like the SPY or specific sector ETFs like JETS for airlines. History shows that every US recession in the last 50 years, looking back from 2025, was preceded by a sharp increase in the price of oil. At the same time, we should expect oil and gas producers to benefit directly from higher commodity prices. Buying call options on energy sector ETFs, such as the XLE, or on individual oil majors offers a direct way to profit from this specific trend. We remember how the energy sector was the market’s top performer during the last major price surge we saw back in 2024 and 2025. However, we must also prepare for a sudden de-escalation, as a diplomatic breakthrough could cause oil prices to collapse just as quickly as they rose. Using option spreads, like bull call spreads on oil futures, can help manage this risk by capping both our potential gains and losses. This more defined approach protects us from a sharp reversal if the planned coalition successfully secures the waterway without incident. Create your live VT Markets account and start trading now.

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South Korea said it will communicate closely with the US on the matter and decide after a careful review, according to a statement from the presidential office on Sunday. In Japan, Takayuki Kobayashi, policy chief of Prime Minister Sanae Takaichi’s ruling Liberal Democratic Party (LDP), said on NHK that the threshold is “extremely high” for sending Japanese navy ships to the region under existing Japanese laws.

Allies Weigh Response To Strait Of Hormuz Security

US President Donald Trump renewed calls on Saturday for allies to help secure the Strait of Hormuz in a post on Truth Social. He wrote that countries receiving oil through the strait “must take care of that passage”, adding that the US will help “A LOT”. The report also said oil prices are expected to be impacted by developments around the Strait of Hormuz, as the US-Israel war on Iran escalates further. Looking back at the events of 2025, we see the initial hesitation from South Korea and Japan created significant uncertainty in energy markets. The calls from the Trump administration to secure the Strait of Hormuz, amidst the escalating conflict, laid the groundwork for the volatility we are managing today. This initial reluctance forced the market to price in a higher risk premium for Mideast oil shipments. That risk is now being realized, as Brent crude futures have climbed to $115 a barrel this week, their highest point in six months. We have seen recent data showing commercial shipping volume through the strait is down nearly 15% from this time last year, as war risk insurance premiums have quadrupled. This sustained disruption, which began with the conflict in 2025, continues to tighten global supply.

Positioning For Prolonged Energy Market Volatility

For traders, this means implied volatility in the energy sector will remain exceptionally high. The CBOE Crude Oil Volatility Index (OVX) is currently elevated at 58, suggesting markets are bracing for sharp price swings in the coming weeks. Therefore, strategies involving long volatility, such as buying straddles or strangles on major oil ETFs, should be strongly considered to capitalize on this instability. The ripple effects are extending beyond crude oil itself. We should be looking at options on shipping and logistics companies, particularly those not heavily active in the Persian Gulf who may benefit from diverted routes. Conversely, bearish positions on airline stocks could be prudent, as new intelligence reports of Iranian naval drills near the strait last week will likely keep jet fuel costs stubbornly high. We saw a similar pattern during the “Tanker War” of the 1980s, where targeted attacks on oil tankers in the strait caused prolonged price spikes and market anxiety. That historical precedent suggests this is not a short-term crisis but a sustained period of geopolitical risk. Traders should therefore structure their positions for a volatile environment that could persist for several more quarters. Create your live VT Markets account and start trading now.

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The Israel Defense Forces (IDF) said on X that it launched a wave of “extensive strikes” across western Iran. It said it was striking “infrastructure” linked to the Iranian regime, according to The Guardian. The IDF also said Iran continued to launch missiles towards Israeli territory in recent hours. It said defence systems were intercepting the threat and told citizens to enter protective spaces.

Escalation And Regional Security

Iran’s Revolutionary Guard Corps (IRGC) said it would target Israeli Prime Minister Benjamin Netanyahu as the conflict with the US and Israel continues. “We will continue to pursue and kill him with full force,” it said on Sunday on its Sepah News website. Iran also accused “the enemy” of using copycat drones to attack neighbouring countries and shift blame onto Tehran. This followed retaliatory strikes across the Middle East. Ahead of the weekly market open on Monday, traders may move towards risk-off positioning. Oil and the US Dollar may attract fresh buying. Given the renewed conflict and direct strikes, we anticipate a sharp increase in market volatility. The VIX index, a key measure of market fear, has already jumped 15% in overnight trading to over 21, a level not consistently seen since the regional banking stress we observed in early 2025. We are therefore considering buying call options on the VIX or put options on major indices like the S&P 500 to hedge against further downside.

Oil Dollar And Volatility Hedges

Oil markets are the most direct beneficiary of this instability, with Brent crude futures surging past $98 per barrel, the highest since last autumn. With over 20% of global oil passing near the conflict zone through the Strait of Hormuz, any disruption could send prices much higher. Consequently, buying May and June call options on crude oil futures (WTI or Brent) or on energy sector ETFs like XLE appears to be a primary strategy. This situation is a classic risk-off trigger, which typically strengthens the U.S. dollar as a safe-haven asset. The U.S. Dollar Index (DXY) has already broken through the 106 level, its strongest point this year, as capital seeks security. This makes long positions in USD futures or call options on currency ETFs an attractive play against more risk-exposed currencies. Looking back at the market reactions during the initial flare-up in late 2025, the initial shock was followed by a period of intense uncertainty that punished risk assets for several weeks. However, the current direct strikes on Iranian territory, rather than on proxy forces, represent a significant escalation that markets have not fully priced in. This suggests the current defensive posturing may need to be held longer than it was back then. Beyond broad market hedges, specific sectors will face significant headwinds from higher energy costs and geopolitical uncertainty. We are looking at airlines, shipping companies, and consumer discretionary stocks as being particularly vulnerable right now. Establishing put positions or selling call spreads on these sectors could provide a valuable layer of portfolio protection in the coming weeks. Create your live VT Markets account and start trading now.

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Donald Trump told NBC News he was not ready to make a deal with Iran because the terms were “not good enough yet”. He said US strikes on Kharg Island had “totally demolished most of the island”, and added the US had not targeted “energy lines” because rebuilding would take years. He declined to say whether the US Navy would escort ships, but said the US would sweep the Strait of Hormuz “very strongly”. He said other countries would join efforts to keep the route open, and that some nations were being impeded from getting oil.

Uncertainty Around Strait Of Hormuz

He said it was unclear whether Iran had dropped mines in the Strait of Hormuz. He also said reports that Iran’s Supreme Leader was dead were a rumour. In Truth Social posts, he said the US had “destroyed 100% of Iran’s Military capability”. He urged countries including China, France, Japan, South Korea and the UK to send warships, and said the US would “help – A LOT”. Reuters reported that the Trump administration rejected Middle Eastern allies’ efforts to start diplomatic talks, citing three sources. Reuters also reported that two senior Iranian sources said Iran had turned down ceasefire talks until US and Israeli strikes end. We are looking at extreme volatility in the energy markets for the coming weeks given the uncertain military action in the Strait of Hormuz. With about a fifth of the world’s daily oil consumption passing through that narrow channel, any disruption creates massive supply-side risk. The president’s comments show a commitment to military action but an unwillingness to commit to a diplomatic solution, fueling this uncertainty.

Trading And Hedging Implications

This situation feels similar to the disruptions we saw back in 2025 after the attacks on Emirati oil facilities, when Brent crude spiked nearly $15 in a single day. Historically, during the “Tanker War” of the 1980s, sustained attacks on shipping caused severe price swings for months. The current rejection of a ceasefire by both sides suggests this conflict could have a longer duration than previous incidents. Traders should consider buying call options on Brent and WTI futures, as a full, even temporary, closure of the Strait could send prices soaring well above current levels. Brent crude has already jumped over $115 a barrel, and implied volatility in the options market is hitting highs not seen since the start of the conflict. The risk of a sudden escalation from a stray mine or drone attack makes holding short positions extremely dangerous. Beyond simple direction, the futures curve is steepening into backwardation, where near-term delivery contracts are much more expensive than later-dated ones. This reflects the market’s acute fear of an immediate supply shock. We are also seeing tanker insurance premiums for the Persian Gulf surge, reportedly increasing tenfold and adding a direct cost to every barrel leaving the region. On the other side, any surprise announcement of diplomatic talks or a sudden de-escalation would cause prices to plummet just as quickly. Therefore, buying far out-of-the-money put options could be a prudent hedge against a rapid reversal. We should also anticipate that continued high energy prices will negatively impact transportation and industrial stocks that are heavy fuel consumers. Create your live VT Markets account and start trading now.

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