WTI crude traded near $95.70 per barrel on Monday, up 5.90% on the day. Prices stayed below $100 and remained under last week’s peak above $106.

The move followed renewed tension around Iran and the Strait of Hormuz. The US President ordered the US military to block vessels linked to Iranian ports from 10:00 Eastern Time on Monday.

Strait Of Hormuz Supply Shock

The Strait of Hormuz carries about 20% of global oil supply. Standard Chartered reported the route has been effectively closed since late February, with tanker traffic falling and Gulf crude exports down about 43% between February and March, leaving around 11 million barrels per day effectively offline.

Peace talks between Washington and Tehran reportedly broke down over the weekend. A two-week ceasefire remained in place.

Saudi Arabia restored full capacity on its East-West pipeline to about seven million barrels per day. This offers an export route via the Red Sea and may reduce reliance on Gulf shipping routes.

The immediate jump to $95.70 shows how seriously the market is taking this blockade threat, but the failure to reclaim $100 shows traders are still weighing the chance of a diplomatic solution. This push and pull between a potential supply shock and hopes for de-escalation is a formula for high volatility in the weeks ahead. Derivative traders should prepare for sharp price swings in either direction rather than a steady trend.

Trading The Volatility

We see a clear risk of prices spiking well above last week’s $106 high if the US enforces the blockade and the ceasefire collapses. Looking back from our perspective in 2025, we recall how the 2019 tanker attacks in the same region caused a nearly 20% price surge in a single day. With recent EIA data showing global spare production capacity is already tight at just 2.1 million barrels per day, the market is far more sensitive to the threatened 11 million bpd disruption.

On the other hand, a breakthrough in negotiations could send prices falling back toward the low $90s just as quickly as they rose. The fact that Saudi Arabia can reroute up to 7 million barrels per day through its East-West pipeline provides a significant, though partial, buffer against a full Hormuz closure. This potential for a rapid price collapse makes holding outright long positions risky without protection.

Given these opposing forces, the most direct trade is on volatility itself. We expect the CBOE Crude Oil Volatility Index (OVX), which has already jumped to 55, to remain elevated as uncertainty reigns. Strategies like long straddles or strangles, which profit from a large price move in either direction, appear well-suited for a market balanced on a geopolitical knife’s edge.

Create your live VT Markets account and start trading now.

GBP/JPY rose for a sixth straight day on Monday, trading near 214.87, its highest level since 4 February. The move followed further weakness in the Yen as oil prices stayed high.

Higher crude prices have raised concerns about Japan’s trade balance because the country relies on imported energy. Tensions in the Middle East have kept supply risks in focus.

Oil Driven Yen Weakness

US President Donald Trump ordered a naval blockade targeting Iranian ports after US-Iran talks ended without a breakthrough. This increased worries about longer-lasting disruption to oil supplies.

Japan is more exposed to energy supply shocks than the UK because a large share of its imports comes from the Middle East. Higher import costs can weigh on growth and raise inflation.

BoJ Governor Kazuo Ueda said the economy and prices are broadly in line with forecasts and that underlying inflation is moving towards the bank’s target. He said inflation risks are two-sided and that a sustained rise in inflation expectations linked to geopolitical tensions could lift underlying inflation.

In the UK, higher energy costs could add to ongoing inflation pressures and complicate a return to the 2% target, limiting room for rate cuts. GBP/JPY has also been supported by the UK-Japan interest rate gap, while USD/JPY near 160.00 remains a level linked to past Japanese intervention.

Rate Differentials And Intervention Risk

The continued rally in GBP/JPY, now at a multi-month high near 214.87, is being directly fueled by surging oil prices. With Brent crude spiking over 12% in the last month to trade above $115 a barrel, the Japanese Yen is weakening far more than the Pound. This is because Japan imports over 90% of its primary energy, making its economy exceptionally vulnerable to the current supply shocks from the Middle East.

The new naval blockade targeting Iranian ports is the clear catalyst for the sustained pressure on the Yen. This development reinforces the market’s tendency to sell the Yen during energy crises, a pattern we also observed during previous supply scares in late 2025. This geopolitical tension creates a clear trading theme that is likely to persist in the coming weeks.

Despite Japan’s latest core inflation reading of 2.5%, the Bank of Japan will likely remain cautious. Governor Ueda’s comments suggest a fear that these high energy costs will damage consumer demand, preventing any aggressive interest rate hikes from the current 0.10% level. This policy inaction keeps the Yen unattractive for traders seeking higher returns.

In the UK, the situation is the opposite, as sticky core inflation was recently reported at 3.8%. This makes it nearly impossible for the Bank of England to consider cutting its 5.25% interest rate, and in fact, keeps pressure on for rates to remain high. The interest rate gap between the UK and Japan is therefore set to widen, providing strong underlying support for GBP/JPY.

Given this fundamental backdrop, we should consider strategies that profit from a continued rise in GBP/JPY. Buying call options with a strike price around 216.00 for the coming weeks offers a way to capture further upside while defining our maximum risk. The underlying positive carry on the trade continues to attract large capital flows, which should support the cross.

However, we must remain vigilant about the risk of government intervention, as USD/JPY approaches the critical 160.00 level. Looking back, we know Japanese authorities intervened heavily to support the Yen in both 2022 and 2024 when the currency weakened past similar psychological thresholds. Traders holding long positions should therefore consider buying out-of-the-money put options to hedge against a sudden and sharp reversal.

Create your live VT Markets account and start trading now.

The US dollar strengthened after President Trump announced a blockade of Iranian ports from 10ET, following failed peace talks over the weekend. Markets also saw weaker stocks and bonds, alongside a rise in oil prices.

The US Dollar Index (DXY) fell back from its earlier Asian-session peak. That peak only slightly rose above 99.2, the intraday high set on Wednesday after Tuesday’s ceasefire announcement.

Dollar Trend Still Under Pressure

Despite the firmer dollar, the rebound in DXY has been limited so far. Recent price action still points to a bearish bias after a sharp fall last week.

The market moves have stayed relatively contained, suggesting traders are waiting for details on the blockade’s scope and its effect on growth. The report also notes that a prolonged period of very high oil prices could harm global growth, with Asian countries most exposed if Gulf supply is reduced.

We are seeing the expected market reaction following last year’s announcement in 2025 of a blockade on Iranian ports. The US dollar has firmed up, while stocks and bonds have weakened due to the geopolitical tension. This initial response, however, seems contained as markets await further clarity on the blockade’s true economic impact.

The most significant move has been in energy, with Brent crude recently surging past $115 a barrel, a level not seen in over two years. This has caused the CBOE Crude Oil Volatility Index (OVX) to spike over 30%, making options strategies much more expensive. Traders should anticipate that call options on oil will remain in high demand as long as the blockade holds.

Key Risks For Investors

While the dollar initially strengthened, the Dollar Index (DXY) is struggling to break key resistance at the 100 level, currently hovering near 99.5. This lackluster follow-through supports the view we held back in 2025 that the dollar’s broader trend remains bearish. This suggests any de-escalation could trigger a sharp reversal, making aggressively long dollar positions risky.

Equity markets are clearly nervous, reflected by the VIX jumping from a low of 18 to over 24 as the S&P 500 slid on the news. This environment makes hedging long portfolios with index puts a priority. Selling volatility through strategies like short straddles is extremely dangerous until tensions show clear signs of subsiding.

We saw a similar dynamic back in 2022 when geopolitical events caused Brent crude to spike towards $140 a barrel, contributing to severe inflation and aggressive central bank action. That period reminds us how a sustained oil shock can damage corporate earnings and slow global growth for several quarters. The current situation could easily follow the same playbook if the blockade is prolonged.

The damage to global growth will likely hit Asian economies the hardest, given their reliance on energy imports from the Gulf. We should therefore consider positioning for weakness in oil-importing emerging markets. This could involve buying puts on relevant country-specific ETFs or shorting currencies like the Indian Rupee and Thai Baht.

Create your live VT Markets account and start trading now.

The New Zealand dollar has risen after hawkish comments from Reserve Bank of New Zealand Governor Breman, who said the Bank could raise rates aggressively if core inflation re-accelerates. Market pricing now implies close to three rate rises by year-end.

This pricing is set against New Zealand’s sizeable negative output gap and a recent run of below-trend growth. OCBC expects the RBNZ to start tightening only in 4Q26.

Rbnz Policy Path And Nzd Risks

OCBC forecasts a single 25bp increase in 4Q26, taking the policy rate to 2.75% by end-2026. The NZD is described as likely to underperform the Australian dollar.

The NZD is also presented as sensitive to higher oil prices. A renewed rise in oil, including moves linked to the breakdown in US–Iran talks, is noted as a potential drag on high-beta energy importers such as the NZD.

The New Zealand dollar has strengthened recently on talk from the Reserve Bank of New Zealand about aggressive rate hikes. Markets are now acting as if nearly three interest rate increases will happen by the end of this year. This seems overdone given the current economic reality.

We see this market pricing as overly aggressive, especially after the last quarter’s GDP growth came in at a sluggish 0.2%. This contrasts with the optimism we saw in late 2025 and, with the latest inflation report showing a slight cooling to 4.2%, it creates a very high bar for the RBNZ to start hiking rates hard. New Zealand’s economy is simply not growing fast enough to support such a move.

Trading Implications For Nzd Positioning

Our view is that the RBNZ will hold off on raising rates until the fourth quarter of 2026. We only expect a single 0.25% hike this year. This means the current strength in the NZD is built on shaky ground and is likely to reverse.

For derivative traders, this outlook suggests buying put options on the New Zealand dollar against the US dollar. This strategy allows you to profit if the NZD weakens as the market’s rate hike expectations fade. It provides a way to position for a downturn while clearly defining your maximum risk.

We also see continued underperformance of the NZD relative to the Australian dollar. Recent iron ore prices, a key export for Australia, have surged to over $130 per tonne while New Zealand’s dairy prices have softened in recent auctions. This divergence supports positioning for the NZD to weaken against the Australian dollar in the coming weeks.

Finally, rising oil prices pose a significant threat to the NZD. With Brent crude now trading over $95 a barrel following the collapse of US-Iran talks, New Zealand’s status as an energy importer will weigh on its economy. This external pressure further dampens the case for the multiple rate hikes the market is currently pricing in.

Create your live VT Markets account and start trading now.

The Strait of Hormuz has been de-facto closed since late February, with tanker transit calls slumping to near-zero across every cargo category. Since then, physical energy markets have repriced sharply higher.

Crude oil exports across the Gulf fell by c.43% between February and March. This left c.11mb/d of production effectively offline.

Implications For Energy Supply

The disruption has spread beyond energy into broader commodity pricing, including food prices. Cross-asset correlations indicate markets are pricing an inflation shock rather than a growth shock.

Hard data has not yet shown any growth impacts. The article was produced using an Artificial Intelligence tool and reviewed by an editor.

With the Strait of Hormuz effectively closed since late February 2026, we must position for sustained high energy prices. The resulting drop of roughly 11 million barrels per day has created a significant supply shock that is not a short-term event. We should be holding or adding to long positions in crude oil futures, particularly in contracts for the coming months like June and July Brent, and buying call options on major energy producers and ETFs.

This supply shock has already driven oil prices to levels not seen in over a decade, with West Texas Intermediate futures now trading above $135 per barrel. For context, we saw a similar, though less severe, spike in the summer of 2022 when prices briefly crossed $120, which at the time significantly impacted global inflation. The current situation is more severe, suggesting these price levels or higher will be the new reality for the foreseeable future.

The market’s immediate reaction is an inflation shock, and we must trade accordingly. With the March Consumer Price Index data reflecting the initial surge in energy costs, we expect the Federal Reserve will abandon any thought of rate cuts this year. We should therefore use interest rate derivatives to bet on a higher-for-longer policy, as the Fed will be forced to combat this new inflationary wave.

Positioning For Macro Volatility

The market has not yet fully priced in the inevitable growth shock that follows a sustained energy crisis of this magnitude. High energy acts as a tax on consumers and a major input cost for businesses, which will eventually slow economic activity significantly. This presents an opportunity for us to begin layering in positions that will profit from a downturn before the rest of the market catches on.

To prepare for this slowdown, we should start buying medium-term put options on broad market indices like the S&P 500 and the Nasdaq 100. Cyclical sectors, such as consumer discretionary and industrials, will be the most vulnerable, making puts on their corresponding ETFs a tactical move. These positions act as a hedge against our inflation-focused trades and will become profitable as hard economic data begins to weaken in the coming months.

The uncertainty of this situation also means we should expect a significant increase in market volatility. The VIX, currently hovering in the low 20s, appears undervalued given the geopolitical risk and economic implications of the strait’s closure. We should be purchasing VIX call options as a direct and cost-effective way to bet on rising market fear and uncertainty.

Finally, we cannot ignore the direct spillover from energy into food prices. Higher fuel and fertilizer costs are already impacting the agricultural sector, a dynamic we saw play out in early 2022 following the conflict in Ukraine. We should look to establish long positions in agricultural commodity futures, such as corn and wheat, to capitalize on the coming rise in food inflation.

Create your live VT Markets account and start trading now.

CFTC FX positioning data show that speculators have continued to rebuild long US Dollar positions. The Dollar is being used as a safe haven during the Middle East conflict.

Current long USD positions are smaller than their peaks in recent years, even though the Dollar has risen in the spot market since late February. Near-term moves are linked to risk appetite and changing expectations for US interest-rate cuts.

Dollar Safe Haven Demand

The Dollar’s safe-haven role is tied to its liquidity and its widespread use for global transactions. It is expected to keep this role for now.

The article also notes ongoing de-dollarisation pressures from Russia, China and the EU. It states the piece was produced using an AI tool and reviewed by an editor.

Speculators have continued to rebuild their long US dollar positions, as the currency remains the preferred safe haven amid ongoing Middle East conflicts. We expect the dollar to keep acting as a safe haven during periods of reduced risk appetite. This trend is likely to draw additional support from dwindling hopes of a near-term US rate cut.

The dollar’s strength is also being fueled by stubborn inflation data. The most recent US Consumer Price Index report from March 2026 came in at 3.1%, causing markets to push back expectations for a Federal Reserve rate cut until later in the year. This marks a significant change in outlook from the more dovish sentiment we saw building in the second half of 2025.

Trading And Hedging Approaches

Current long USD positions held by speculators, as reported by the CFTC, have now reached over $15 billion, a significant increase since February. However, this is still considerably smaller than the peaks of over $40 billion that we saw in 2022. This suggests that if global tensions escalate further, there is still room for more capital to flow into the dollar.

For traders looking to capitalize on this trend, buying call options on the Dollar Index (DXY) can provide upside exposure with a defined risk. Selling puts on currency pairs like EUR/USD is another way to express a bullish dollar view, collecting premium as the dollar benefits from its safe-haven credentials. The dollar’s role as the world’s primary transactional currency anchors this status for now.

Despite the current environment, longer-term de-dollarisation pressures from Russia, China, and even the EU persist as a background factor. Traders holding assets in other currencies might consider using options to hedge against further dollar strength in the coming weeks. This can protect portfolios from near-term volatility driven by risk appetite and US interest rate expectations.

Create your live VT Markets account and start trading now.

Euro area activity data in Q1 were weaker than expected, with German industry under pressure. An oil price shock is described as narrower than the 2022 energy shock, with a smaller impact on European activity.

In Germany, industrial production is still falling slightly year on year. A German GDP forecast of 0.1% quarter on quarter for Q1 is maintained, with limited scope for a higher outcome.

Euro Area Fundamentals And Key Supports

Euro area fundamentals are supported by strong private sector balance sheets, investment linked to AI and energy, German fiscal stimulus, and housing markets that are stabilising. The risk of broad second-round wage effects like those seen in 2021–22 is described as lower.

Demographics in many countries may keep labour markets tight. This could lead to earlier upward wage pressure in response to the energy price shock and German fiscal stimulus.

Looking back to early 2025, the market was grappling with weak German industrial figures, which kept a lid on broad European optimism. At the time, we noted the underlying resilience from strong private balance sheets and investment needs in AI and energy. This created a cautious but not outright bearish sentiment for traders.

That cautious optimism proved to be well-founded, as the German fiscal stimulus did indeed help stabilize the industrial sector through the latter half of that year. We’ve now seen German industrial production finally post a 1.2% year-over-year gain as of February 2026, a stark contrast to the declines we were tracking back then. This turnaround suggests the downside risks from that period have largely faded.

Market Positioning And Trading Implications

The concern about wage pressures from a tight labor market was a key point for us in 2025, and it remains relevant today. While headline inflation has cooled to 2.6% according to the latest Eurostat flash estimate, core inflation remains sticky above 3%, driven by services. This divergence keeps the European Central Bank’s future path uncertain, suggesting that options strategies that profit from volatility, like straddles on the Euro STOXX 50, are attractive.

The resilience in private balance sheets has directly translated into stronger-than-expected consumer sentiment, which we see reflected in retail sales figures from France and Spain over the past quarter. Therefore, derivative traders should consider positioning for continued strength in consumer-facing sectors over German heavy industry. Call options on consumer discretionary ETFs could outperform puts on industrial indexes, playing on the same divergence we identified over a year ago.

Given the persistent core inflation and wage tightness, the market may be pricing in an overly optimistic path for ECB rate cuts this year. Looking at Euribor futures, the forward curve suggests at least two more cuts by year-end, which seems aggressive. We believe there is value in using interest rate swaps or selling Euribor futures contracts to position for a more hawkish-than-expected ECB stance in the coming months.

Create your live VT Markets account and start trading now.

The European Central Bank kept key interest rates unchanged in March. The deposit rate is 2.0% and is treated as a neutral level.

Deutsche Bank economists now expect two 25 basis point rate rises, in June and September. Markets have already priced in these two moves.

Market Pricing And Rate Path

By the end of the year, markets price in about 66 basis points of tightening. This implies a 64% probability of a third rate rise.

The economists cut their eurozone growth forecast for 2026 to 0.5%, from 1.1%. They cite higher energy prices and weak economic data as factors.

Eurozone inflation is forecast at 2.8% in 2026. German fiscal policy is mentioned as a possible support for the wider eurozone.

The article states it was produced with the help of an AI tool and reviewed by an editor.

Trading Implications And Risk Scenarios

We see the European Central Bank in a tough spot, as it is expected to raise rates twice this year to fight inflation. However, the economy is clearly slowing down, which makes these rate hikes risky for growth. The market has already priced in these two 25 basis point increases for June and September.

The latest March inflation data for the Eurozone came in at 2.4%, which is still above the 2% target and supports the case for rate hikes. But recent business activity surveys, like the Purchasing Managers’ Index which showed manufacturing at a contractionary 47.1, point to a continued economic weakness. This weak data makes it harder for the central bank to justify tightening policy and hitting the 0.5% growth forecast.

We remember how the ECB was caught off guard by the inflation spike back in 2022 and was forced to raise rates aggressively. This memory is likely pushing them to act tough now to maintain their credibility. Their main fear is letting inflation become entrenched again, even at the cost of short-term economic pain.

Given this conflict, a key strategy is to position for the ECB to pause its hiking cycle sooner than expected due to the weak economy. This could be done using derivatives like interest rate swaps or by buying futures contracts tied to Euribor. The goal is to profit if the market starts to price out the September rate hike because of worsening economic data.

We also see opportunities in the currency market, particularly with the Euro. If the ECB chooses to prioritize the struggling economy and pauses its rate hikes, the Euro could weaken against the US dollar. Traders might look at buying put options on the EUR/USD, which would gain value if the Euro falls.

Create your live VT Markets account and start trading now.

ING economists Peter Virovacz and Frantisek Taborsky said Hungary’s new Tisza-led supermajority has reduced near-term policy uncertainty. They said it has also lifted expectations of faster institutional repair, improved EU relations and stronger fiscal credibility.

They said EU-fund disputes may not be resolved quickly, despite broad expectations. They expect delays before any EU money is released.

Budget Reset And Fiscal Tradeoffs

They said the budget is under pressure to be reworked because the macroeconomic assumptions behind it have changed. They added that removing the inherited budget and economic policy framework could worsen fiscal metrics in the short term.

They said the new government could set a target date for adopting the euro and outline a route to reach it. They said details of that route could be adjusted later.

The article said it was created with the help of an Artificial Intelligence tool and reviewed by an editor.

The new supermajority provides a clearer political outlook, but this stability comes with a mix of signals. We see short-term fiscal pain clashing with the long-term promise of institutional repair and credibility. This suggests that implied volatility on forint options, which was already elevated during the 2025 election cycle, will likely remain high in the coming weeks.

Trade Setup For Near Term Volatility

We expect the process of dismantling the inherited budget to reveal some negative figures. Hungary’s budget deficit already hit HUF 2,321 billion in the first quarter of 2026, and any further short-term deterioration to restructure policy will likely weigh on the forint. This environment favors buying near-term call options on the EUR/HUF pair, targeting a move above the 400 level.

The optimism surrounding the release of EU funds should be treated with caution. We saw back in the 2023-2025 period how drawn-out these negotiations can be, and any delay would remove a key support for the currency. Continued uncertainty here supports holding bearish positions on the forint for the next one to two months.

However, the possibility of setting a target date for euro adoption is a major bullish catalyst that cannot be ignored. A credible announcement would trigger a significant rally in the forint as convergence trades are put on. Traders should consider buying longer-dated, out-of-the-money call options on the HUF to position for this potential upside without taking on excessive near-term risk.

This creates an environment for calendar spread strategies on the EUR/HUF. One could sell near-term calls to capitalize on current premiums while simultaneously buying calls with later expiration dates. This would position for short-term weakness or sideways movement followed by a potential forint strengthening later in the year.

Create your live VT Markets account and start trading now.

US existing home sales fell short of forecasts in March. The market expected 4.06 million, but the actual figure was 3.98 million.

This result indicates sales were lower than predicted over the month. It reflects weaker activity than the forecast level.

Housing Market Cooling Signal

The miss in March existing home sales suggests the housing market is cooling more than we anticipated. This softness is a direct result of affordability issues, a trend we also saw through much of 2025 when 30-year mortgage rates remained above 6.5%. For traders, this is a clear signal that the Federal Reserve’s restrictive policy is having a strong effect on rate-sensitive sectors.

This weak housing number directly increases the probability of a Fed rate cut later this year. We are seeing fed funds futures markets already pricing in a higher chance of a cut by the third quarter. This report clashes with recent inflation data that showed core services remaining sticky, putting the central bank in a difficult position.

Given the pressure on the housing sector, we should consider bearish positions on homebuilder ETFs like ITB and XHB. Buying put options on these instruments could be an effective strategy to capitalize on expected further weakness. This also applies to related retail, like home improvement stores, which see sales decline when housing turnover slows.

Conversely, the growing expectation of future rate cuts makes government bonds more attractive. We see an opportunity in going long Treasury note futures, as their prices will rise if the Fed signals a more dovish stance. This acts as a good hedge against slowing economic growth.

Preparing For Higher Volatility

The conflict between slowing growth and persistent inflation is likely to increase overall market volatility in the coming weeks. Traders should look at options strategies on the S&P 500 to play these expected price swings. This reminds us of the choppy conditions we navigated in late 2025 when the market was uncertain of the Fed’s next move.

Create your live VT Markets account and start trading now.