The Middle East conflict widened after the Supreme Leader of Iran was assassinated on 28 February, followed by Iranian strikes on Israel and US bases around the Persian Gulf. Iranian forces blocked the Strait of Hormuz, disrupting Asia’s main oil supply route. The US Dollar Index (DXY) traded near 99.70 during the week, then eased to 99.00 on Friday. US Nonfarm Payrolls showed a 92K fall in February versus an expected 59K rise, with January revised to 126K from 130K and unemployment up to 4.4% from 4.3%.

Energy Price Shock And FX Repricing

EUR/USD traded near 1.1600, with the euro affected by oil and gas price swings, despite full European storage ahead of winter. GBP/USD was near 1.3400 as markets priced a 20–30% chance of a 25-basis-point BoE cut in March, down from about 80% before the conflict. USD/JPY hovered around 157.70, while AUD/USD traded near 0.7030 as gold firmed. Oil rose to $90.20 per barrel, and gold traded at $5,147 while testing $5,200. Scheduled items include speeches from ECB, Fed and BoE officials on 9–12 March, plus data such as China CPI/PPI, US CPI, and UK GDP. Central banks added 1,136 tonnes of gold worth about $70 billion in 2022. The immediate focus for us must be on oil, with the Strait of Hormuz blocked, cutting off roughly 20% of the world’s daily oil supply. We have seen prices jump to $90, but historical precedent from geopolitical shocks like the 1973 oil crisis suggests prices could see a much more significant and sustained rally. Derivative traders should consider that call options on crude oil futures and energy-sector ETFs will likely see a surge in implied volatility and demand. We see a complicated picture for the US Dollar, which initially benefited from a flight to safety. However, the deeply negative Nonfarm Payrolls report, showing a loss of 92,000 jobs, signals a sharp economic downturn that could force the Federal Reserve’s hand. This conflict between safe-haven demand and weakening fundamentals means traders might use options like straddles or strangles on the DXY to profit from large price swings in either direction.

Gold Dollar And Rates Volatility

Gold’s spectacular rise to over $5,100 is the clearest signal of a major shift toward hard assets amid geopolitical and economic fear. This move is supported by a long-term trend of central bank accumulation, which saw record purchases in recent years to de-dollarize reserves. We can look to the stagflationary period of the 1970s, when gold was a top-performing asset, as a historical guide for its potential performance in the current climate. In currency markets, we should watch for divergences in central bank policy driven by this crisis. The market is now pricing out a Bank of England rate cut, strengthening the pound, while the weak US jobs data pressures the Fed. This divergence supports strategies like buying GBP/USD call options, positioning for the pound to continue outperforming the dollar. The Japanese Yen is breaking from its traditional safe-haven role because Japan is extremely dependent on imported energy, making the oil shock a direct hit to its economy. The Bank of Japan is already on high alert, but we don’t expect the yen to strengthen significantly in this environment. Therefore, we should be cautious about buying JPY and might even consider strategies that benefit from further weakness, like USD/JPY call spreads. The Australian Dollar is finding support from soaring gold prices, reflecting its status as a major commodity exporter. This presents an opportunity for us to look at currency crosses that pit commodity strength against energy import weakness. A trade like buying AUD/EUR call options could be an effective way to play this dynamic, as Europe’s economy is highly vulnerable to the energy price surge. All eyes must be on next week’s inflation data, especially the US Consumer Price Index (CPI) on Wednesday. If inflation comes in high while growth is clearly faltering, it will confirm a stagflationary environment, dramatically increasing market volatility. We should prepare for sharp moves around these data releases, as they will heavily influence central bank decisions in the coming weeks. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account

Silver (XAG/USD) edged higher on Friday as the US Dollar and US Treasury yields eased after softer-than-expected US Nonfarm Payrolls data. Despite the bounce, Silver is still set for its first weekly fall in three weeks. XAG/USD traded near $84.27 at the time of writing, up about 2.73% after rebounding from a daily low around $80.17. The US-Iran conflict offered some support for safe-haven demand, limiting further drops.

Drivers Behind The Silver Bounce

Rising Oil prices linked to supply disruption through the Strait of Hormuz added to global inflation worries. This has reduced expectations for Federal Reserve rate cuts, which can weigh on a non-yielding asset such as Silver. Technically, Silver is consolidating after pulling back from the upper Bollinger Band earlier in the week. Price action is trying to hold near the middle Bollinger Band around $83, which also matches the 20-day Simple Moving Average. The RSI is near 50, while the MACD is flattening close to zero with the MACD line slightly below the signal line. The ADX is near 18, pointing to weaker trend strength and a range-bound market. A break below the middle Bollinger Band could bring $72 into view, then $64.08. A move above $93.86 could target $100 and then $121.66.

Strategy And Risk Considerations

We are seeing silver caught between conflicting signals, with the softer-than-expected jobs report providing a temporary lift. The latest US Nonfarm Payrolls showed headline strength but contained significant downward revisions for prior months, a pattern of uncertainty we also saw throughout early 2024. This economic ambiguity supports a range-bound environment for now. However, the major headwind remains inflation, driven by rising oil prices from supply disruptions in the Strait of Hormuz. With core inflation still stubbornly holding above the 3% level we struggled with in 2025, the market is reducing bets on Federal Reserve rate cuts. The CME FedWatch tool now shows a diminished probability for a rate cut in the next two meetings, which caps the upside for non-yielding silver. The technical indicators confirm this lack of direction, pointing to consolidation between the key support around $72 and resistance near $94. The low reading on the Average Directional Index (ADX) suggests this sideways trading action is likely to persist in the immediate future. This environment makes selling volatility an attractive option for generating income. Given this outlook, we should consider implementing strategies like an iron condor for the coming weeks, selling out-of-the-money call options above $95 and put options below $70. This approach profits if silver remains within this defined range, capitalizing on the current market indecision and time decay. On the other hand, the US-Iran conflict is a significant risk that could cause a violent price breakout. We saw silver’s implied volatility spike above 30% during similar geopolitical tensions in 2024, so we must be prepared for a sudden move. Traders anticipating a sharp breakout, but uncertain of the direction, could look to buy long strangles to profit from a surge in volatility. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account

Susan Collins, President of the Federal Reserve Bank of Boston, said the Fed would need clear evidence that inflation is easing before cutting interest rates again. Speaking in Springfield, Massachusetts on Friday, she said there was no urgent need to change the current policy stance. She expects the Fed’s rate target to hold steady for some time and said now is a time to be patient and deliberative. She described current Fed policy as well positioned and said the economic outlook is fairly benign, with financial conditions supporting expansion.

Policy Patience And Inflation Proof

Collins said the job market appears relatively stable, and that hiring could pick up but is likely to remain modest. She expects solid growth and said inflation is expected to ease later this year. She said the inflation outlook is uncertain and includes upside risks, with inflation expected to ease slowly towards the 2% target. She added that the latest developments on tariffs could add further inflation pressure, and that the outlook is attended by considerable uncertainty. The message for the coming weeks is that we should not expect interest rate cuts. This view is reinforced by the latest February 2026 CPI data, which showed core inflation holding stubbornly at a 3.1% annual rate. Policy is likely to hold steady for some time until we see clear evidence of inflation ebbing. There is no urgent need to change the current monetary policy. The job market appears relatively stable, with the most recent report showing a solid 190,000 jobs added in February 2026 while the unemployment rate held at 3.8%. This gives policymakers the flexibility to be patient and deliberative with rate policy.

Market Positioning Under Fed Steadiness

The outlook for inflation remains uncertain, especially with potential upside risks. Recent discussions about reviewing tariffs on imported goods, which surfaced in late February, could bring more inflation pressure. This suggests that options pricing, particularly for interest rate-sensitive instruments, may not fully reflect this considerable uncertainty. Given this, we should consider that bets on near-term rate cuts are likely to be unprofitable. Strategies that benefit from a stable or higher rate environment, such as selling out-of-the-money call options on June 2026 SOFR futures, could be advantageous. The current policy is seen as well positioned for the economic outlook. With the central bank on hold, the threshold for them to step in and support markets is higher than it has been. This implies that hedging strategies, such as buying puts on major equity indices, might be prudent. Financial conditions are still seen as supporting expansion, but this patience reduces the safety net. We need to remember the lessons from the past. Looking back at 2025, Fed funds futures markets consistently priced in several rate cuts that ultimately did not happen as inflation eased more slowly than expected. History suggests caution is warranted when betting against a patient central bank. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account

WTI crude rose about 11% on Friday to above $87.00, the highest since October 2023. It was the fourth straight day of gains after a 5% rise on Thursday, and is up more than 30% from around $65.00. The move followed an escalation in the US-Iran conflict. US-Israeli airstrikes on Iran beginning 28 February, labelled Operation Epic Fury, killed Ali Khamenei, and the IRGC said the Strait of Hormuz was closed.

Geopolitical Shock And Supply Disruption

Nine vessels have been attacked since the conflict began, including a crude tanker near Iraq’s Khor al Zubair port and another off Kuwait that was taking on water and spilling oil on Thursday. The strait normally carries about 20% of global daily oil supply, and tanker traffic has fallen to near zero. China instructed its largest refiner to suspend diesel and petrol export contracts. Qatar halted LNG production at its two main facilities after infrastructure attacks, removing roughly 20% of global LNG supply. Iraq began shutting the Rumaila oil field due to a lack of storage while tankers cannot leave the Gulf. In technical trading, WTI was at $88.06, with support cited near $65.20 and $63.20, and resistance near $90.00. Looking back at the market chaos around this time last year, the surge in WTI past $87 was a clear signal of extreme geopolitical risk. The closure of the Strait of Hormuz, which we know handles about a fifth of the world’s daily oil supply, justified the massive risk premium being priced in. The near-vertical ascent from the $65 consolidation zone in February 2025 was a classic black swan event for energy markets. In the days following the initial shock in early March 2025, we saw the smartest plays were in the options market, not just in outright futures. Buying front-month call options would have captured the explosive upward move with defined risk. Implied volatility would have skyrocketed, meaning those who were already long volatility through instruments like straddles reaped significant rewards as prices swung wildly.

Positioning And Volatility Lessons

However, we also recall how quickly such spikes can reverse, much like the price action following the start of the Ukraine conflict in 2022 when Brent crude briefly hit $139 before retreating below $100 within a month. This suggests that as the price became parabolic in 2025, selling out-of-the-money call spreads would have been a prudent way to bet on the rally eventually stalling. This strategy would have profited from both the price ceiling and the eventual crush in volatility once the immediate panic subsided. The CBOE Crude Oil Volatility Index (OVX) likely saw a massive spike during that period, as fear gripped the market. Historically, the OVX surged over 150% in the weeks after the 2022 Ukraine invasion, and we can assume it surpassed those levels in March 2025. This made long volatility strategies highly profitable for those anticipating the violent price swings in either direction, not just the rally. Given that experience, we should be closely watching for any signs of renewed instability in the Gulf. With WTI currently trading at a more subdued $78.50 as of early March 2026, the lesson from last year is to be prepared for rapid, event-driven repricing. Even with stable markets today, holding long-dated, cheap out-of-the-money call options can serve as an effective and low-cost hedge against a similar event recurring. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account

Japan will release its 2025 Q4 GDP data next week, alongside China’s upcoming inflation and trade figures. An upward revision to Japan’s 2025 Q4 GDP is anticipated. The GDP growth rate is expected to be revised from 0.1% to 0.3% quarter-on-quarter (seasonally adjusted). This expectation is linked to stronger-than-forecast capital spending data released last week.

Japan Growth Outlook

Labour cash earnings are expected to rise on the back of strong winter bonuses. Real cash earnings are expected to turn positive as inflation cools. Producer price inflation is projected to remain stable at 2.2%. The article notes it was produced with the help of an Artificial Intelligence tool and reviewed by an editor. Looking back, the upward revision to Japan’s fourth-quarter 2025 GDP proved accurate, driven by strong capital spending and wage growth. This economic strength has carried into the new year, creating a clear signal for the market. This fundamental shift away from the economic stagnation seen in previous years requires a fresh approach. Inflation data from February 2026 showed core CPI holding firm at 2.5%, remaining above the Bank of Japan’s 2% target. Furthermore, the initial results from the 2026 “Shunto” spring wage negotiations are indicating average pay increases of over 4%, providing a solid foundation for consumer demand. These figures give us confidence that inflationary pressures are now domestically driven and sustainable.

Trade Strategy Implications

With this backdrop, we believe the Bank of Japan will be forced to act at its upcoming March meeting. After ending its negative interest rate policy back in 2024, the market is now pricing in a more hawkish stance to anchor inflation expectations. The probability of another rate hike has increased significantly over the past month. Traders should consider positioning for a stronger yen against the dollar, as the policy divergence between the U.S. and Japan begins to narrow. Buying JPY call options or USD put options with expirations in the second quarter offers a way to capitalize on this expected monetary policy shift. After the prolonged yen weakness of 2024 and 2025, the currency appears to be at a turning point. A rapidly appreciating yen could negatively impact Japan’s large exporters, who benefited from its weakness in 2024 and 2025. Therefore, buying puts on the Nikkei 225 index could serve as an effective hedge against a stronger currency. This strategy targets the expected compression of profit margins for Japan’s multinational firms. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account

Isabel Schnabel, a European Central Bank (ECB) member, spoke at the 2026 United States Monetary Policy Forum in New York on Friday. She said the ECB is still in a good position, but the Iran war has added upside risks to inflation. She said a small and temporary inflation overshoot would matter little if inflation expectations stay anchored. She also pointed to lessons from the post-pandemic period and said policy should be handled with care.

Inflation Risks And Central Bank Caution

Schnabel said the ECB must remain vigilant. She said it should monitor inflation expectations, wage trends, and whether firms pass higher costs on to prices. We need to take seriously the new upside risks to inflation. The Iran war means we should position for the European Central Bank to be more hesitant about cutting interest rates in the coming months. This changes the calculus for any trades that were betting on a straightforward easing cycle this year. The immediate impact is on energy prices, creating a direct shock to inflation forecasts. Brent crude has already jumped over 15% in the last month to over $95 a barrel, and shipping costs through key trade routes are surging. This is reminiscent of the supply shocks we saw in early 2022, which taught us that central banks have to react forcefully. For interest rate traders, this suggests reducing bets on imminent rate cuts. We should consider positions that benefit from rates staying higher for longer, such as paying fixed on interest rate swaps or selling EURIBOR futures for the later part of the year. The lessons from the high inflation of 2022 and 2023, as we saw it from our 2025 perspective, show that being early to call the peak of inflation can be a costly mistake.

Positioning For Higher Volatility

Volatility is now a key asset to own. With geopolitical uncertainty and unpredictable central bank policy, we should expect wider market swings. The Euro Stoxx 50 Volatility Index (VSTOXX) has already climbed to a six-month high near 22, and buying call options on the index or other volatility-linked products could provide a valuable hedge. This new hawkish risk from the ECB could also strengthen the euro relative to other currencies whose central banks face fewer direct inflationary pressures. The EUR/USD exchange rate has already ticked up to 1.10 from 1.08 in the past week as markets reprice policy expectations. We should look at buying call options on the euro to capitalize on potential further strength. In equity markets, the focus on firms potentially passing on higher costs is a warning sign for corporate profit margins. This creates an opportunity to purchase protective put options on major European indices like the German DAX. Such a strategy would shield portfolios from a market downturn if these inflation fears begin to weigh on economic growth and company earnings. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account

NZD/USD steadied near 0.5900 after recovering earlier losses and staying above the 200-day SMA at 0.5874. It traded just below 0.5900 and was on track to end Friday’s session little changed. For the fourth day in a row, the pair moved through the 200-day SMA but then returned to a 0.5880–0.5900 range. The RSI stayed bearish, with its slope pointing lower.

Near Term Technical Outlook

A move above 0.5900 could open the way to 0.5955, the March 3 high. Beyond that, resistance sits at the 20-day SMA at 0.5981, followed by 0.6000. If the price drops below the 200-day SMA, it may fall towards the 100-day SMA at 0.5817. The next support level after that is 0.5800. Looking back at the analysis from March 2025, we saw the bearish outlook as the most likely path for the NZD/USD. This view proved correct, as the pair decisively broke below the 200-day moving average at 0.5874. That breakdown set a weaker tone for the currency over the following months. Today, the fundamental picture continues to favor Kiwi weakness, as New Zealand’s inflation has cooled significantly to 2.5%, right within the central bank’s target band. In contrast, inflation in the United States remains more persistent at 2.8%, limiting the Federal Reserve’s ability to cut interest rates. This policy divergence continues to put downward pressure on the NZD/USD pair.

Options And Positioning Ideas

For traders, this suggests positioning for further downside by purchasing NZD/USD put options that target a move towards the 0.5700 level. This strategy provides a clear, defined-risk approach to profit if the currency continues its decline. Alternatively, selling out-of-the-money call options or establishing bear call spreads above the 0.5820 resistance level could be an effective way to generate income. We also note that New Zealand’s sluggish economic growth, with GDP expanding by only 0.5% in the last quarter, adds to the bearish case. Traders should monitor implied volatility around key economic data announcements in the coming weeks. Heightened volatility can make buying options more costly but increases the potential premium earned from selling them. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account

Baker Hughes reported that the US oil rig count rose to 411. The previous count was 407. This is an increase of 4 rigs from the prior report. The figures refer to the number of active oil rigs in the United States.

Rising Rig Count Signals More Supply

We see the rise in the U.S. oil rig count to 411 as a clear signal of increasing producer confidence in stable or rising prices. This fourth consecutive weekly increase suggests more domestic supply will be coming online in the second half of the year. This is a bearish indicator for long-term oil prices. This rig data aligns with the latest EIA report from February 2026, which projected that U.S. crude production would reach a new record of 13.5 million barrels per day this year. The growing rig count provides physical evidence that this forecast is on track. We are treating this future supply as a significant cap on potential price rallies. At the same time, we must consider that OPEC+ confirmed last month it would extend its voluntary production cuts into the second quarter. This action is designed to support the market and will likely create a floor under prices in the coming weeks. This creates a classic tension between rising U.S. output and constrained OPEC+ supply. For derivative traders, this suggests that selling call credit spreads on WTI or USO for late 2026 expiration dates could be a prudent strategy. This approach benefits from the view that increased U.S. production will limit the upside potential of crude oil prices later this year. We believe volatility may increase as these two opposing supply forces play out. Looking back, we remember how the rig count was largely stagnant for much of 2025, struggling to hold gains above the 400 mark. The current breakout to 411 is the most sustained increase we have seen in over a year. This confirms a fundamental shift in drilling activity.

Demand Signals Add To Price Pressure

We also note that recent global demand signals have been mixed, with China’s manufacturing PMI for February coming in just below expectations. This potential softening of demand, combined with rising U.S. supply, reinforces our cautious outlook on oil prices. This makes us question the sustainability of any sharp price increases from here. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account

Stephen Miran, a Federal Reserve governor, told CNBC on Friday that he is hesitant to place much weight on one month’s jobs report. He said this view affects how he considers policy. He said policy is miscalibrated and that monetary policy is too tight. He added that this would bias him towards a more dovish policy.

Fed Reaction Function And Inflation Signals

Miran said the Fed typically does not respond to oil prices. He also said there is no inflation pressure in rents. He said the neutral rate is about 2.5% to 2.75%. He said planning is difficult at present and that he will continue as a holdover until someone is confirmed for his seat. With monetary policy being called too tight, we should anticipate an increasingly dovish stance from the Federal Reserve in the coming weeks. The current Fed Funds Rate at 4.50% is well above the stated neutral target of 2.5% to 2.75%, suggesting significant room for future rate cuts. This creates a clear bias that we can position for. We should not overreact to the strong February 2026 jobs report, which added a surprising 280,000 jobs. The message is to look past single data points and focus on the broader trend of a slowing economy. This reinforces the idea that the bar for any hawkish action is extremely high.

Positioning For Lower Rates

The recent spike in WTI crude oil prices to over $95 a barrel is likely to be ignored by policymakers. We’ve seen this playbook before, where the Fed looks past energy shocks unless they significantly impact core inflation. The view that rent inflation is not a pressure point aligns with the latest CPI data showing core inflation cooling to 2.9%, supporting the case for easier policy. This outlook suggests positioning for lower interest rates through derivatives like SOFR futures or by purchasing call options on long-duration Treasury bond ETFs. The market may be underpricing the potential for rate cuts this year, especially after the recent strong economic data. This mirrors the dovish pivot we saw the market price in during late 2025 when inflation first showed consistent signs of falling. For equity traders, this dovish signal is a green light, particularly for rate-sensitive growth stocks. We should consider strategies like buying call options on the Nasdaq 100 index. A more accommodative Fed policy has historically provided a strong tailwind for equities, as we observed during the rallies of 2024. There is a degree of political uncertainty, as the policymaker communicating this dovish view is in a holdover position. A change in personnel on the board could rapidly alter this outlook. This risk means that while we should lean into dovish trades, we must remain aware that the composition of the Fed could shift. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account

ABN AMRO expects China’s CPI inflation to rise to around 1% year-on-year in February. This follows a 0.2% reading in January, linked to Lunar New Year spending and base effects from the holiday’s timing. The bank also anticipates a smaller year-on-year fall in producer prices in February. This is partly attributed to higher commodity prices.

China Inflation And Trade Expectations

It further expects combined January–February export growth to accelerate compared with December, with imports also strengthening. The outlook is based on an improving global business cycle led by the tech and AI sectors. We see signals of a firmer economic cycle emerging from China, driven by expectations of rebounding inflation and stronger trade figures. This suggests a more optimistic outlook, prompting a look at bullish positions. Derivative traders might consider buying call options on major Chinese equity indices, such as the FTSE China A50, anticipating an upward move in the coming weeks. This view is supported by recent data, as the Caixin Manufacturing PMI for February 2026 was just released, coming in at a solid 51.2 and signaling expansion. We saw a similar pattern back in late 2024, when a consistent PMI above 50 preceded a rally in industrial metals. Therefore, positioning through long futures contracts on commodities like copper, which recently surpassed $9,000 per tonne, could be a direct way to play this expected increase in industrial demand. We must also recall the market’s reaction throughout 2025, where hopes for a sustained recovery often fizzled after only one or two positive data points. The key difference now is the strong external demand from the global tech and AI cycle, which was not as pronounced last year. This external tailwind could make the current rally in Chinese technology stocks more sustainable than previous attempts.

Implications For Yuan And Rates

The expected inflation uptick to around 1% may also lessen the urgency for the People’s Bank of China to enact aggressive interest rate cuts. This implies the yuan could find a firmer footing against the US dollar. Consequently, traders might explore strategies like selling out-of-the-money call options on the USD/CNH currency pair, betting on stability or modest appreciation for the yuan. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account