GBP/USD fell to about 1.3300 in Asian trading on Monday, after mild gains in the prior session. The move came as the US Dollar rose on safe-haven demand linked to the Iran war. Mojtaba Khamenei was named Iran’s new supreme leader just over a week after Ayatollah Ali Khamenei was killed in US-Israeli strikes. US President Donald Trump said the appointment would be “unacceptable” and said Washington should have a role in choosing Iran’s next leader.

Oil Prices And Safe Haven Flows

The US Dollar also gained support from rising oil prices on fears that the conflict could disrupt energy supplies. WTI climbed above $111.00 per barrel at the time of writing. Traders also raised inflation expectations after hostilities began last week. This increased bets that the Federal Reserve might delay interest rate cuts. In the UK, higher energy prices added to inflation concerns and reduced expectations of a Bank of England rate cut this month. Futures markets signalled no further policy changes for the rest of the year. UK Prime Minister Keir Starmer repeated that he did not join the initial US-Israel strikes and pointed to diplomacy. Trump rejected reports that the UK planned to deploy HMS Prince of Wales to the Middle East, and called Britain a “once great ally.”

Rates Divergence And Market Positioning

Given the market memory of last year’s conflict, we see the US Dollar’s strength as a key theme that has persisted. The initial flight to safety in 2025 has since evolved into a yield-driven trade, with the Federal Reserve having held interest rates higher for longer than anticipated. Current Fed funds futures are only pricing in a 60% chance of a single rate cut by the third quarter of this year, reflecting stubborn inflation that took root after the oil shock. Traders should consider that while the WTI oil price has fallen from its peak above $111 last year, it remains elevated, trading this morning near $85 per barrel. This lingering price pressure is keeping implied volatility in energy derivatives high, creating opportunities for those positioning for either a fragile peace or a sudden re-escalation of hostilities in the Middle East. Any renewed tension could quickly send prices back toward the $100 mark. For those trading interest rate derivatives, the divergence between the Fed and the Bank of England is critical. Last year, both central banks abandoned rate-cut expectations, but with UK inflation now tracking at 3.8% for January 2026—slightly above the latest US CPI of 3.5%—the BoE may be forced to delay easing even longer than the Fed. This suggests that trades positioning for a wider US-UK rate differential could be profitable in the coming months. In the foreign exchange space, GBP/USD is still feeling the effects of the diplomatic strains that emerged in 2025, currently struggling below 1.2900. Options traders should note that while spot prices are subdued, one-month volatility for the pair remains higher than historical averages, indicating the market is still pricing in political and economic uncertainty. Using option structures like risk reversals could be an effective way to position for a potential pound recovery while limiting downside risk. Create your live VT Markets account and start trading now.

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IMF Managing Director Kristalina Georgieva said resilience is being tested again due to new conflict in the Middle East. She said a prolonged conflict could affect market sentiment, growth and inflation. She said imported oil and gas facilities have suffered damage and stoppages. She said energy security has become the top concern.

Resilience Tested By Middle East Conflict

Georgieva said every 10% increase in oil prices, if it lasts through most of the year, would raise global inflation by 40 basis points. She described current conditions as a world of uncertainty and said this is the new normal. She advised policymakers to prepare for extreme scenarios. She said independent central banks, fiscal rules and policy frameworks can support faster growth. She said countries should keep fiscal space so it can be used during shocks. She said Japan’s central bank is responding to a move away from prolonged below-target inflation with a series of policy decisions. We recall the warnings from late 2025 about resilience being tested by the new Middle East conflict. Those concerns about energy security have now kept crude oil prices elevated for months. This situation implies that volatility in the energy sector will likely persist, creating opportunities in options trading to hedge against or speculate on sharp price movements.

Derivatives Strategies For Volatility

With West Texas Intermediate crude hovering around $95 a barrel, recent data shows a 15% increase since the start of this year. This reflects the continued production discipline from OPEC+ and minor but persistent supply disruptions we have seen in the region. Derivative traders should therefore consider positioning for further upside risk in crude prices through call options or bull call spreads on major energy ETFs. The persistent 10% year-over-year increase in oil prices is adding the expected 40 basis points to global inflation, a concern we were warned about. February’s CPI data already showed inflation remaining stubbornly above the Federal Reserve’s target, leading markets to price out one anticipated rate cut for this year. This makes derivatives that protect against higher-for-longer interest rates, such as interest rate swaps or options on treasury futures, increasingly relevant. This uncertainty is the ‘new normal’ we were told to prepare for, and it is reflected in broader market sentiment. The CBOE Volatility Index (VIX) has been holding firmly above 18, a notable premium compared to historical averages during periods of economic expansion. Traders should therefore look at using VIX futures or options to hedge equity portfolios against sudden geopolitical shocks. We are also seeing the divergence in central bank policy that was hinted at in 2025, particularly with Japan. While the Bank of Japan continues its slow, ‘nimble’ path out of its ultra-loose policy, the Fed remains hawkish due to energy-driven inflation. This widening policy gap suggests continued strength in the U.S. dollar against the yen, presenting opportunities in USD/JPY currency options. Create your live VT Markets account and start trading now.

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EUR/JPY traded lower near 182.95 in early European trading on Monday, slipping below 183.00 as the Japanese Yen strengthened against the Euro. Germany’s January Industrial Production data is due later on Monday, while Japan’s Q4 Gross Domestic Product report is scheduled for Tuesday. The US-Israeli war with Iran has entered its 10th day. Iran named Mojtaba Khamenei, the second son of Ayatollah Ali Khamenei, as the new Supreme Leader after his father was killed in the first wave of US-Israeli strikes.

Escalation Drives Safe Haven Demand

US President Donald Trump demanded Iran’s “unconditional surrender” and said he expects a role in selecting a leader acceptable to the White House. Iran has launched missiles and drones at Israel and Gulf states, including Saudi Arabia, the UAE, Kuwait, and Bahrain. The rise in regional tensions supported demand for the Yen and pressured the currency pair. Attention remains on how the conflict may affect market moves in the near term. Uncertainty over the Bank of Japan’s interest rate path may limit further Yen gains. Governor Kazuo Ueda signalled a prolonged hold, and Reuters reported that while some expected a March hike, many now see no change until at least April or July. Given the high tension, holding unhedged positions is extremely risky, and we are seeing a scramble for protection. We should consider buying options to guard against sudden, sharp moves in EUR/JPY, as currency market volatility has surged over 30% in the past ten days. This spike is reminiscent of the market shocks we saw back in 2024.

Euro Vulnerability And Positioning

Capital is flowing into traditional safe havens like the Japanese Yen, a pattern we have seen in every major global crisis. This demand for the Yen is occurring even though the Bank of Japan is signaling it will delay interest rate hikes. This suggests the geopolitical risk is currently the market’s primary driver. The Euro is under intense pressure because Europe is highly vulnerable to energy price shocks from the Middle East. With Brent crude oil now trading above $145 a barrel, a level not seen since late 2023, the risk of a European recession has increased significantly. Germany’s latest ZEW Economic Sentiment survey, released last week, already showed a sharp fall into negative territory. In this environment, we should be looking at strategies that profit from falling prices or rising volatility. We are advising on buying EUR/JPY put options to position for a move towards the 180.00 level in the coming weeks. The options market shows a heavy bias for JPY strength, with the cost of protecting against a fall in the cross at its highest point in over a year. Create your live VT Markets account and start trading now.

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EUR/USD traded near 1.1520 in Asian hours on Monday after small gains in the prior session. The daily chart shows the pair still moving within a descending channel, keeping the bias bearish. The pair has fallen below the nine-day Exponential Moving Average (EMA), with that EMA turning lower, and it remains under the 50-day EMA. This keeps both short-term pressure and the wider trend tilted to the downside.

Oversold Signals And Momentum

The 14-day Relative Strength Index (RSI) has dropped below 30, which points to oversold conditions. The RSI move lower suggests selling momentum is still present rather than a clear end to the fall. Support is first seen at the seven-month low of 1.1468. Below that, levels to watch include the channel base near 1.1430 and the nine-month low of 1.1391. Resistance is seen at the nine-day EMA near 1.1650. A move higher would need a daily close above the 50-day EMA at 1.1742, then the channel top near 1.1790, with 1.2082 as the highest level since June 2021. Looking back at the analysis from late 2025, we saw a strong bearish momentum for EUR/USD as it approached seven-month lows near 1.1468. The pair was trading within a descending channel, and the Relative Strength Index signaled oversold conditions. However, the fundamental picture has changed significantly in the first quarter of 2026.

Macro Drivers And Policy Divergence

The primary driver for us now is the clear divergence in inflation data between the two economic blocs. The Eurozone’s flash CPI estimate for February 2026 came in higher than expected at 2.8%, showing persistent price pressures. Conversely, the latest U.S. inflation figures have cooled to 2.5%, reinforcing the case for the Federal Reserve to begin its easing cycle. This data has forced a shift in central bank expectations, which we believe is fueling the pair’s recent recovery towards the 1.1600 handle. We now see the market pricing in a delayed rate cut from the European Central Bank, possibly not until Q3 2026. Meanwhile, futures markets indicate a greater than 70% probability of a Federal Reserve rate cut by its June meeting. For derivative traders, this environment suggests considering strategies that benefit from a potential grind higher, while hedging against volatility. We see value in buying put options with a strike near 1.1450 as a hedge against any sudden reversal or hawkish surprise from the Fed. The Cboe EuroCurrency Volatility Index (EVZ) has risen to 8.5, indicating that the market is pricing in more movement in the coming weeks. On the upside, we think a bull call spread could be an effective strategy to capture further gains with limited risk. For example, buying an April 1.1650 call while simultaneously selling an April 1.1750 call could profit from a move through the old nine-day EMA resistance level mentioned in last year’s analysis. This structure takes advantage of the current upward momentum driven by policy divergence. Create your live VT Markets account and start trading now.

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AUD/CAD fell more than 0.5% to about 0.9485 in Asian trading on Monday, dropping below 0.9500 as the Canadian Dollar strengthened. The move followed rising oil prices linked to the Middle East conflict involving the US, Israel and Iran. WTI crude rose over 25% to above $110.00 during Asian trade. The BBC reported that several Iranian oil depots were struck in a joint US and Israeli operation over the weekend.

Oil Prices Support The Canadian Dollar

Higher oil prices tend to support the Canadian Dollar because Canada is the largest exporter of oil to the US. Attention now turns to Canada’s February employment report due on Friday. Markets expect employment to rise by 9.5K after a 24.8K fall in January. The figures may affect expectations for the Bank of Canada’s monetary policy outlook. The Australian Dollar weakened as demand fell for risk-sensitive assets amid the escalating conflict. S&P 500 futures dropped over 2% at the open, indicating reduced risk appetite. Given the sharp move in AUD/CAD, we should consider short positions to ride this momentum. Put options on the pair could be an effective way to capitalize on further downside while limiting risk. The break below the key 0.9500 level suggests more weakness is likely in the near term.

Positioning And Risk Sentiment

The driving force is oil, and this conflict appears to be in its early stages. We remember how WTI crude futures spiked to over $120 a barrel in early 2022 after the conflict in Ukraine began, so the current price of $110 has room to run, especially with warnings of $150 oil. Long positions in oil futures or call options on energy-related ETFs seem prudent. This is a classic risk-off environment, confirmed by the significant drop in S&P 500 futures. We should anticipate continued fear in the market, which makes buying volatility a direct and potentially profitable strategy. VIX call options are likely to perform well if geopolitical tensions continue to escalate throughout the week. The Canadian dollar’s strength is fundamentally supported by Canada’s position as a top-five global oil producer. With Canada exporting over four million barrels per day, primarily to the US, a sustained period of higher oil prices directly benefits its terms of trade. This provides a strong tailwind for the loonie against other currencies. Meanwhile, the Australian dollar is suffering as a risk-proxy currency, a role we saw it play during the market downturns of 2022 and 2025. As long as global equity markets remain under pressure, the Aussie will likely struggle to find buyers. The currency’s fate in the coming weeks is tied to the broader market’s appetite for risk. We must keep an eye on the Canadian employment data scheduled for this Friday. While the current geopolitical narrative is overwhelming, a surprisingly weak jobs report could temporarily halt the Canadian dollar’s advance. This event presents a key risk, and positions should be managed accordingly heading into the release. Create your live VT Markets account and start trading now.

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The Australian Dollar fell 0.65% to about 0.6985 against the US Dollar in Asian trading on Monday. AUD/USD was down over 0.6% as oil prices rose amid conflict involving the US, Israel and Iran. S&P 500 futures dropped more than 2% in early trade. The US Dollar Index (DXY) rose over 0.7% to around 99.60, its highest level in more than three months.

Risk Aversion Hits Australian Dollar

WTI crude jumped over 25% in Asian trade to above $110.00. The move followed strikes on several Iranian oil depots over the weekend, reported by the BBC, in an operation involving the US and Israel. Higher energy prices tend to pressure riskier currencies as funding flows shift towards safer assets. US President Donald Trump said on Truth.Social that higher oil prices were a “very small price to pay” in relation to Iran’s nuclear programme. Markets will watch the US Consumer Price Index (CPI) for February, due on Wednesday. The report may have limited effect on Federal Reserve policy expectations because it does not reflect the latest oil price rises linked to the Middle East conflict. We have seen this playbook before during past Middle East conflicts where the Australian dollar gets hit hard. Looking back at the events of 2025, a sudden escalation saw the AUD/USD tumble below 0.7000 as WTI crude surged over $110 a barrel. This kind of geopolitical shock creates a classic flight to safety, punishing risk-sensitive currencies like the Aussie.

Positioning And Hedging Ideas

Today, with AUD/USD trading around 0.6540 and WTI crude oil near a more stable $80 a barrel, we see significant room for a volatile move. Any renewed conflict in the region could easily trigger a repeat of the 2025 scenario, pushing oil prices dramatically higher. This would place immediate and severe downward pressure on the Australian dollar. The US Dollar Index (DXY) is currently holding firm above the 103 mark, partly because the latest US Consumer Price Index data from February showed inflation remains sticky at 3.2%. A geopolitical crisis would likely accelerate the rush into the US dollar for safety, pushing the DXY much higher. This would create a powerful dual headwind for the AUD/USD pair. Given this historical precedent, we should consider positioning for a potential drop in the AUD/USD over the coming weeks. Buying put options on the Australian dollar against the US dollar offers a defined-risk way to profit from a sudden downturn. This strategy acts as a direct bet on history repeating itself should tensions flare up once again. Similarly, we should look at the volatility in energy and equity markets. Call options on WTI or Brent crude futures would benefit directly from an oil price spike caused by supply fears. At the same time, buying put options on the S&P 500 could hedge against the broad market sell-off that typically accompanies such global uncertainty. Create your live VT Markets account and start trading now.

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USD/CHF rose above 0.7800 and traded near 0.7820 in Asian hours on Monday, after falling in the previous session. The move came as demand for the US Dollar increased on safe-haven flows and higher energy prices. The US Dollar Index (DXY) climbed towards three-month highs and traded around 99.50. Support also came as West Texas Intermediate (WTI) crude oil rose above $100.00 per barrel to over three-year highs, on worries that a longer Middle East conflict could disrupt global energy supply.

Geopolitical Risk And Oil Price Support

CBA economists reported that Iran may respond to gain leverage in future talks to end the war. They also said the US and Israel may seek to reduce Iran’s offensive capacity to gain leverage in future talks. The Telegraph reported that US President Donald Trump called the rise in oil prices a “very small price to pay” for defeating Iran and ensuring global peace. It also reported that Trump wrote on Truth Social that Iran’s only option is unconditional surrender, after which he would help select its next leader. Gains in USD/CHF may be limited if the Swiss Franc strengthens on safe-haven demand. Traders are also watching for Swiss National Bank intervention, as SNB Vice-President Antoine Martin repeated that the bank is ready to act against excessive Franc strength, while Swiss inflation remains weak. Last year, we saw USD/CHF rally past 0.7800 driven by conflict fears in the Middle East and a spike in oil prices. That situation was a clear signal for long US Dollar positions against the Franc. Today, the environment is different, with West Texas Intermediate crude having stabilized around $82 per barrel after a production increase from non-OPEC members late last year.

Shifting SnB Policy And Trade Implications

A key shift is the Swiss National Bank’s focus, which is no longer on capping Franc appreciation but on fighting persistent inflation, which clocked in at 2.1% for February 2026. This contrasts with last year’s environment where the US Dollar Index was near 99.50; today it trades closer to 95.20. Consequently, the SNB is far less likely to intervene against Franc strength, removing a major headwind for the CHF. For the coming weeks, buying call options on USD/CHF seems misplaced given the changed fundamentals. Instead, traders could consider purchasing put options to speculate on a further decline towards the 0.7650 level seen earlier this year. This strategy benefits from a stronger Franc driven by the SNB’s hawkish stance and calmer energy markets. However, we must remember how quickly volatility surged after the events in Ukraine back in 2022, reminding us that geopolitical calm is fragile. Implied volatility on USD/CHF options is now at a multi-month low, making long-dated straddles relatively cheap. This could be a prudent way to position for a potential, unexpected spike in market tension without betting on a specific direction. Create your live VT Markets account and start trading now.

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S&P 500 futures fell close to 2.5% in the Asian session on Monday and opened with a bearish gap. The move was linked to fears that the Middle East conflict will keep oil prices high and weigh on global growth. The US-Israeli campaign against Iran reached its tenth day, with no clear end in sight. Iran appointed Mojtaba Khamenei as Supreme Leader more than a week after Ayatollah Ali Khamenei was killed in US-Israeli strikes.

Oil Supply Risks

Tankers have avoided the Strait of Hormuz, raising concern about supply problems. Crude Oil prices have risen by over 25%, which has increased worries about energy-led inflation. Higher oil prices may add pressure for major central banks, including the US Federal Reserve, to keep policy tighter. Higher energy costs may also reduce economic activity and lower demand for riskier assets. Markets are also watching for this week’s US consumer inflation figures for clues on the Federal Reserve’s rate-cut path. Geopolitical developments remain a main driver of wider market risk mood. We remember how the market was shaken last year by the sudden escalation in the Middle East and the death of Ayatollah Khamenei. The S&P 500 reacted immediately with a sharp drop, as we saw oil prices surge in a way that reminded many of the 2022 energy crisis. This event set the stage for a year of heightened inflation and cautious central bank policy.

Market Conditions Now

The effects are still with us today, in March 2026. WTI crude oil has settled into a high range, currently trading around $95 a barrel, and the latest US consumer inflation report for February showed a stubbornly high 4.1% year-over-year increase. Because of this persistent inflation, the Federal Reserve has paused its rate-cutting cycle, keeping borrowing costs elevated for longer than anyone anticipated last year. This persistent uncertainty is clearly reflected in the derivatives market. The CBOE Volatility Index, or VIX, has been trading in an elevated range, currently sitting at 24, well above the long-term average. This signals that traders are actively pricing in the risk of large, sudden market swings in the near future. For traders, this means the cost of portfolio insurance remains high. Buying protective put options on major indices like the SPX is an expensive strategy, as the high implied volatility inflates option premiums across the board. The market is paying a premium for downside protection, reflecting the deep-seated fear of another geopolitical shock. The tension has also fueled a flight to safety, strengthening the US dollar. The Dollar Index (DXY) is trading near multi-year highs, putting pressure on commodity prices and the earnings of multinational corporations. Meanwhile, government bond yields remain high as investors demand more compensation for inflation risk. In the coming weeks, all eyes will be on the upcoming OPEC+ meeting at the end of the month. Any statements regarding production quotas or the stability of supply through the Strait of Hormuz will be a major catalyst for the market. We should also watch the next round of inflation data for any signs that price pressures are finally easing. Create your live VT Markets account and start trading now.

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The US Dollar Index (DXY) traded near 99.65 in Asian hours on Monday, rising above 99.50. It reached its highest level since late November 2025 as tensions grew in the Middle East. US President Donald Trump said he does not want to negotiate an end to the war with Iran and demanded that Tehran capitulate, while US and Israeli airstrikes continued. Israel’s Defence Minister Israel Katz warned Lebanon on Saturday to disarm Hezbollah or “pay a very heavy price”.

Middle East Tensions Lift Safe Haven Demand

The US Dollar strengthened against other currencies as demand rose for safer assets amid the conflict. The move was also linked to higher oil prices. US labour data presented a counterweight to the Dollar’s rise. The US Bureau of Labor Statistics reported that Nonfarm Payrolls fell by 92,000 in February. This followed a January increase of 126,000, revised from 130,000. The February result also missed the forecast for a 59,000 rise. We are seeing the US Dollar Index push above 99.50, a level not seen in over three months, driven by escalating conflicts in the Middle East. This safe-haven rush is the dominant force in the market right now. However, the market is also trying to digest a shockingly weak US jobs report from last Friday.

Trading Strategy Under Higher Volatility

The sharp conflict between a risk-off geopolitical event and poor domestic economic data creates significant uncertainty, which is a recipe for higher volatility. The Cboe Volatility Index (VIX) has already jumped to over 24, climbing from the mid-teens just a few weeks ago. This environment suggests that buying options to play on large price swings, rather than just direction, could be a primary strategy in the coming weeks. The geopolitical tensions have also sent crude oil prices surging, with WTI crude recently breaking past $95 a barrel for the first time since late 2024. This supports the dollar against currencies of energy-importing nations like the Euro and the Japanese Yen. Derivative traders might look at call options on the USD against these currencies to ride the current safe-haven trend. At the same time, we cannot ignore that the US economy lost 92,000 jobs, which is a major reversal from expectations of a 59,000 gain. While we saw volatile jobs data throughout 2025, a miss of this magnitude is a serious red flag for the health of the US economy. This weakness suggests the dollar’s current strength is built on a shaky foundation. This weak employment figure immediately impacts expectations for Federal Reserve policy. Fed funds futures are already shifting to price in a higher probability of an interest rate cut at the next FOMC meeting. A rate cut would be bearish for the dollar, creating a direct conflict with the current rally. Given these opposing forces, traders should consider strategies that hedge against a sudden reversal. For instance, while holding a long dollar position via futures, one could buy out-of-the-money put options on a currency pair like USD/JPY. This provides protection if the negative economic data begins to outweigh the safe-haven demand, causing the dollar’s rally to quickly unwind. Create your live VT Markets account and start trading now.

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WTI crude rose for a fifth straight session, opening with a gap up and trading near $110.60 a barrel in Asian hours on Monday. It reached $110.73, its highest level since June 2022, amid concerns that a prolonged Middle East conflict could disrupt energy supplies. Middle Eastern producers reduced output as the Strait of Hormuz remained closed due to the Iran war. Kuwait announced precautionary cuts, and Iraq’s southern output fell to 1.3 million barrels per day from 4.3 million.

Supply Shock In The Gulf

Qatar’s energy minister Saad Sherida Al‑Kaabi told the Financial Times that Gulf producers may halt exports within weeks. The report said oil could rise to $150 per barrel. The Telegraph reported that US President Donald Trump described higher oil prices as a “very small price to pay” in the context of defeating Iran. Trump also posted that Iran’s option was unconditional surrender and that he would help choose Iran’s next leader afterwards. The Iran war entered its second week with no stated end point. Mojtaba Khamenei was appointed supreme leader just over a week after Ali Khamenei was killed in US-Israeli strikes. A correction on March 9 at 2:30 GMT revised the headline to “over three-year highs”, not “54-month highs”.

Derivatives Positioning And Risk

With WTI crude breaking $110, the immediate focus should be on bullish strategies using derivatives. We are seeing a massive surge in call option buying, particularly for contracts with strike prices of $120 and $130 expiring in the next two months. The CBOE Crude Oil Volatility Index (OVX), a key measure of oil price volatility, has already surged past 60, reflecting extreme market uncertainty and making options premiums very expensive. We should remember the price action following the conflict in Ukraine back in early 2022, when crude briefly touched similar levels before peaking near $130. Given the direct closure of the Strait of Hormuz, a chokepoint for roughly 20% of global supply, the $150 per barrel target mentioned seems increasingly plausible. This historical precedent from last decade suggests the current rally has significant room to run as long as the conflict continues to escalate. In the futures market, we are observing an extreme state of backwardation, signaling a severe immediate supply shortage. The premium for the front-month April contract over the May contract has blown out to over $5, a level not seen since the supply shocks we experienced in 2025. This structure strongly incentivizes holding long positions and signals that the physical market is exceptionally tight right now. Despite the bullish momentum, the risk of a sharp reversal on any news of de-escalation means hedging is critical. We are seeing some traders buy far out-of-the-money put options as a low-cost way to protect against a sudden peace agreement or a coordinated release from strategic petroleum reserves. The high implied volatility makes these hedges expensive, but they could be essential if the political situation changes unexpectedly. Create your live VT Markets account and start trading now.

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