TD Securities strategists Ryan McKay and Daniel Ghali explain how Middle East tensions—and different outcomes involving Iran—could change oil pricing. Using 75 years of data on geopolitical risk premia, they lay out paths that range from extra supply (lower prices) to Brent rising above $100–$120/bbl if risk premia stay elevated. In a “New Deal,” successful US-Iran talks could ease sanctions and reroute commodity flows, which would likely push energy prices down. In a “Clean Break,” a quick intervention that leads to regime change could cause an initial jump, but risk premia could fade if energy infrastructure is not damaged. In “Unilateral Action,” Iran or Israel acts alone. That raises fears about the Strait of Hormuz or a broader war. TD Securities expects an initial $5–$10/bbl spike, similar to moves seen around the Twelve Day War. In an “Expanded US Conflict,” a wider US-Iran fight increases risks to the regime and raises the chance of a Strait of Hormuz disruption. Even if any disruption is brief, prices could spike by about +$15/bbl. “Domestic Action” that hits Iranian energy infrastructure could reduce supply and exports, with a roughly +$10/bbl spike. In “Regional escalation,” a wider conflict could threaten infrastructure outside Iran. That could add at least +$25/bbl and lift prices above $100–$120/bbl. After recent failed diplomacy in Geneva and skirmishes near the Strait of Hormuz, markets are pricing meaningful uncertainty. Brent is hovering near $88 per barrel. The CBOE Crude Oil Volatility Index (OVX) has climbed to 35, its highest since last fall. This backdrop calls for strategies that can handle a wide range of outcomes in the coming weeks. One possibility is a “New Deal” with Iran, which could bring a large amount of oil back to market quickly. To hedge this bearish outcome, buying out-of-the-money puts on April or May contracts could be a low-cost option. Based on tanker-tracking data from late 2025, we estimate Iran could raise exports by more than 1.5 million barrels per day within a quarter—enough to overwhelm current demand forecasts. On the other hand, the risk of “Unilateral Action” by Iran (or its proxies) and Israel remains high and could trigger a sudden spike. Long call spreads can be a sensible way to position for a $5 to $10 jump while limiting downside. This mirrors what happened in October 2025, when a temporary Red Sea disruption sparked a sharp but short-lived rally before fundamentals reasserted themselves. A more severe “Regional Escalation” that threatens energy infrastructure beyond Iran would likely create a major price shock and push Brent well above $100 per barrel. In that scenario, far out-of-the-money calls—such as $110 or $120 strikes—could act like a lottery-ticket trade with large upside. The latest EIA figures show nearly 21 million barrels of oil move through the Strait of Hormuz each day, so even a hint of a prolonged closure could exceed the supply shocks seen in 2022. Because the next major move could be up or down, trades that benefit from volatility itself may be appealing. A long straddle—buying a call and a put at the same strike—can profit from a big move in either direction. That fits the current environment, where the outcome could be either a supply surge from a new deal or a supply shock from a new conflict.

here to set up a live account on VT Markets now

The Pound has fallen against the US Dollar for a fourth straight day. It traded near 1.3600 on Friday after slipping from weekly highs above 1.3700. Softer risk appetite has helped the USD rebound. Trading volumes are still light ahead of the US Consumer Price Index (CPI) release. US headline CPI is expected to rise 0.3% in January. The annual rate is forecast to ease to 2.5% from 2.7% in December. Core CPI is seen falling to 2.5% year on year from 2.6% in December. GBP/USD is testing support near 1.3600. This level sits close to the lower edge of an ascending channel on the daily chart. That setup keeps the broader bias positive, even as near-term price action stays subdued. The 14-day Relative Strength Index is 51, down from overbought levels. A reading near 50 suggests range trading. A move above 60 would support more upside. We saw this same setup in February 2025. GBP/USD was testing 1.3600 while markets waited for US inflation data. Traders expected inflation to cool, which would have weakened the dollar. The call for inflation to fall to 2.5% was the main story at the time. What followed in 2025 showed how stubborn price pressures can be. US core inflation stayed much higher than expected and averaged 3.9% in the second half of the year. The Federal Reserve dropped plans for rate cuts and kept a hawkish tone into the autumn. The “stronger for longer” dollar theme later broke the chart support. At the same time, the UK economy struggled. GDP growth in 2025 came in at a weak 0.5%. The Bank of England also had to keep rates high to fight inflation. This gap in economic strength turned the early-2025 ascending channel into a bull trap. Support at 1.3600 gave way, and the pair fell sharply in the months that followed. Now, on February 13, 2026, a similar mix is appearing again. US non-farm payrolls showed a stronger-than-expected 215,000 jobs added in January. UK inflation just came in at 3.1%, still well above the Bank of England’s target. With that backdrop, derivatives traders may want to be careful around any Pound strength and consider buying GBP/USD puts to hedge against a repeat of last year’s slide.

here to set up a live account on VT Markets now

EU leaders are discussing a multi‑speed approach to integration. They want to support structural reform and boost competitiveness. An informal summit ended with no decisions, but it showed more willingness to move forward without full unanimity. European Commission President Ursula von der Leyen said she will present a “One Europe, One Market” roadmap at the next formal summit in March. She and European Council President António Costa said they prefer to move ahead with all 27 member states, but they are also looking at tools such as enhanced cooperation.

Enhanced Cooperation And Corporate Rules

Enhanced cooperation could be used to create a “28th regime”. This would be a harmonised set of corporate rules to help firms expand across borders. It would sit alongside national laws, so companies could choose between the new regime and their national system. Von der Leyen said that if there is no progress on the Savings and Investment Union this year, she will pursue it with a smaller group of countries. The debate also includes whether Eurobonds are being considered. Overall, it points to a shift toward less uniform action across the EU. More talk of a multi‑speed Europe is adding uncertainty, and this is likely to build ahead of the March summit. Markets are already reflecting this. The VSTOXX index has risen to 19.5 from its late‑2025 lows. This suggests that buying options to hedge against sharp moves—or to benefit from them—could be a sensible approach in the coming weeks. This risk of divergence brings the classic core‑versus‑periphery trade back into view. If a core group pushes ahead with deeper integration, investors may treat their government bonds as safer than those of countries that do not join. Last year, during similar debates, the spread between Italian and German 10‑year government bonds widened by more than 25 basis points. That pattern could return.

Currency Rates And Euro Volatility

For the euro, the outlook is uncertain, which can make currency options more appealing. A stronger, more integrated core could support the euro. But the headline risk of a more fragmented union could weaken it. EUR/USD is currently near 1.0950. A long‑strangle options strategy could work well here, as it can profit from a large swing in either direction without requiring a view on the political outcome. There may also be opportunities in specific equity sectors. A Savings and Investment Union would likely benefit financial and banking stocks. The January 2026 PMI data already show differences across countries, with Germany’s manufacturing at 51.2 while others lag. This supports favoring companies in countries most likely to be part of the fast‑moving core. Capital flows also point the same way, with net outflows from peripheral European equity funds over the past three weeks. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

US annual CPI inflation slowed to 2.4% in January, down from 2.7% in December, according to the BLS. This was below the market forecast of 2.5%. Monthly CPI rose 0.2% in January, after a 0.3% increase in December. Core CPI rose 2.5% year over year, in line with expectations.

Market Reaction And Key Numbers

After the release, the US Dollar Index slipped from session highs and was last near flat at 96.90. Before the data, forecasts called for 2.5% annual CPI and 0.3% monthly CPI. Core CPI was expected at 0.3% month on month and 2.5% year on year. The CPI report was delayed due to a brief partial US government shutdown. CPI inflation has stayed below 3% since mid-2024. The lowest reading in the past two years was 2.3% in April 2025. The Federal Reserve’s inflation target is 2%, and it mainly bases policy on the PCE Price Index. Donald Trump nominated Kevin Warsh for Fed Chair when Jerome Powell’s term ends in May. EUR/USD levels referenced included 1.1900, 1.1820, 1.1930, 1.1980, 1.2082, 1.1800–20, 1.1760 and 1.1700.

Trading Implications And Fed Path

January inflation came in slightly below expectations at 2.4%. On its own, that would usually support the case for an interest rate cut. But core inflation held steady at 2.5%, which sends a mixed message to the Federal Reserve. As a result, the timing of the next policy move remains unclear. Market pricing reflects that uncertainty. The CME FedWatch Tool now shows about a 40% chance of a rate cut at the March meeting, only a small increase after the data. The Fed has kept its key rate in a 5.25% to 5.50% range for more than a year, waiting for clearer evidence that it can begin easing. This CPI report alone is unlikely to be enough. For derivatives traders, the key theme over the next few weeks is volatility. The CBOE Volatility Index (VIX) is near 16, showing elevated policy uncertainty without signs of panic. Options on major indices and currencies may become more expensive as traders prepare for a sharper move. We have seen a similar setup before, based on what happened in 2025. After CPI fell to a two-year low of 2.3% in April 2025, a run of stronger economic data kept the Fed on hold through the summer. That history suggests caution about betting on an immediate rate cut based on one softer headline reading. The next major catalyst is the March FOMC meeting, and traders may want to position with that in mind. One approach is to use options expiring in late March or April to capture the market reaction to the Fed’s decision and statement. A main focus will be any changes to the Fed’s official economic projections. In FX, the dollar’s muted reaction has kept EUR/USD capped below the 1.1930 resistance level. One-month implied volatility in EUR/USD options has climbed above 7.5%, suggesting the market expects a potential breakout. Traders can use this to structure trades for either continued range-bound action or a bigger move after the next jobs report. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The United States core Consumer Price Index (CPI), seasonally adjusted, increased in January. It rose to 332.79 from 331.86 in the prior period. This move shows a month-over-month rise in core CPI. The data covers January and is reported in index points. Core inflation in January was higher than expected, with a 0.28% monthly gain. This suggests underlying price pressure is not easing as fast as hoped. As a result, the market is now seriously questioning whether the Federal Reserve will cut rates in the first half of the year. This inflation report adds to the recent labor market data, which showed strong job growth well above forecasts, with more than 225,000 jobs added. Together, these reports suggest the economy may be running too hot for the Fed. This is a shift from much of 2025, when the data pointed to steady cooling. Expect the forward interest-rate curve to move higher in the coming weeks. This makes trades that benefit from later rate cuts more appealing, such as selling SOFR or Fed Funds futures in the summer contracts. Also expect interest-rate volatility to rise. The MOVE index, now near 95, could move up from these levels. For equities, this increases the risk of a pullback as higher discount rates weigh on valuations. Consider buying protective puts on broad indices like the SPX and NDX. Implied volatility, measured by the VIX, may rise from recent lows near 14, which can support long VIX positions. A more hawkish Fed would likely strengthen the U.S. dollar versus other major currencies. This supports long-dollar strategies, such as call options on the U.S. Dollar Index (DXY). The U.S. outperformance story seen in late 2025 appears to be gaining momentum again.

here to set up a live account on VT Markets now

EUR/GBP bounced from early losses on Friday after Eurozone GDP data met forecasts. The pair traded near 0.8717 after rebounding from around 0.8700. Eurostat said Eurozone GDP rose 0.3% quarter-on-quarter in Q4 2025, matching both expectations and the prior reading. Annual GDP grew 1.4% in Q4, above the 1.3% forecast. Employment Change held at 0.2% quarter-on-quarter in Q4, above the 0.1% forecast. Annual employment growth was 0.6%, in line with expectations. ECB Governing Council member Gabriel Makhlouf said inflation is “basically on target” and that policy is in a good place. He also said the data supports keeping policy unchanged. In the UK, GDP grew 0.1% quarter-on-quarter in Q4, below the 0.2% expectation. Annual GDP growth slowed to 1% from 1.2%. BoE chief economist Huw Pill said policy should focus on underlying inflation, which he put closer to 2.5% than 2%. He added that policy remains restrictive and that holding rates at current levels should be enough. Reuters reported that EUR/GBP risk reversals rose to 78.8 basis points on Tuesday, the highest level since late September. Last quarter’s data shows a clear split that favors the Euro over the Pound. The Eurozone is growing as expected and the labour market looks steady, which supports the Euro. The UK, by contrast, posted weaker growth, which adds pressure to the Pound. Central bank signals are also pushing in the same direction. The ECB looks comfortable with its current stance, especially after January 2026 inflation printed at 2.1%, right on target. The BoE, meanwhile, is sounding more dovish as growth softens, even though underlying inflation is still a concern. Options markets reinforce this view. Risk reversals show the strongest demand for Euro calls since last September. With one-month EUR/GBP implied volatility at a low 4.8%, it is relatively cheap to buy options that benefit from a higher exchange rate. This supports looking for upside with defined risk. With that in mind, the 0.8700 area looks like an important support zone after Friday’s bounce. Building long EUR/GBP exposure—potentially through call spreads—looks reasonable. If the divergence continues, a move toward the 0.8850 resistance from late 2025 is a realistic target in the coming weeks.

here to set up a live account on VT Markets now

The US Consumer Price Index (CPI) excluding food and energy rose 2.5% year over year in January. This matched the 2.5% forecast. The data shows that underlying inflation stayed steady at the expected rate. There was no gap between the actual result and the market estimate.

Implications For Fed Policy And Volatility

January core inflation came in at 2.5% year over year, exactly as the market expected. That removes a major uncertainty for the next few weeks. With no surprise in the data, the Federal Reserve has no new reason to change its current wait-and-see approach to interest rates. As a result, implied volatility in equity index options, measured by the VIX, may fall from the higher levels seen in late 2025 and settle closer to the 13–15 range. If market swings are expected to be smaller, selling options premium becomes more attractive. Consider strategies such as iron condors on the S&P 500, which can profit when the index stays within a set range. After last year’s effort to push inflation down from above 3%, this stable period may create a clearer window for income-focused trades that benefit from time decay. This reading also supports expectations in interest rate markets. Fed Funds futures are now fully pricing in no change at the next policy meeting. The CME FedWatch tool likely puts the odds of unchanged rates above 90%, leaving limited room for bets on a near-term surprise. Rate traders may now look further ahead to the summer meetings to judge when a possible easing cycle could begin.

Key Risk From Upcoming Employment Data

Attention now shifts to the next employment report. A stronger-than-expected jobs or wage number could quickly bring inflation concerns back. This CPI report is supportive for now, but market narratives can change fast, as they did after strong labor data in the third quarter of 2025. Any new positions should be managed with the next major economic releases in mind. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The U.S. Consumer Price Index (CPI) rose 0.2% month over month in January. This was below the expected 0.3%. The data shows inflation is rising more slowly than forecast. The report compares the actual monthly change in prices with what the market expected.

Rising Rate Cut Expectations

Because January inflation was cooler than expected, the odds of a Federal Reserve rate cut have risen sharply. Market pricing in the CME FedWatch tool now shows a 75% chance of a rate cut by the March meeting, up from 40% last week. This suggests the disinflation trend may be returning after a stretch of stubborn price pressures. We should consider increasing exposure to long-dated call options on rate-sensitive growth assets, especially technology. Looking back at 2025, high interest rates weighed on tech valuations for much of the year. This new inflation print could be a catalyst for further gains in indices like the Nasdaq 100, which has already risen more than 3% this week. This backdrop is also supportive for fixed income, which makes long positions in Treasury futures more appealing. The 10-year Treasury yield has already fallen below the key 3.8% level after the release. We expect yields could keep drifting lower, which would support bond prices. Implied volatility may decline as the Fed’s path becomes clearer, which can make selling premium more attractive. The VIX is already below 15, a big change from much of 2025, when inflation uncertainty drove higher volatility. Strategies such as selling puts or using iron condors on major indices could perform well in this setting.

Dollar Weakness Outlook

A more dovish Fed would likely weaken the U.S. dollar versus other major currencies. As U.S. rates fall relative to overseas rates, the interest-rate advantage that supported the dollar may shrink. This view can be expressed by shorting U.S. dollar index futures or buying put options on dollar-tracking ETFs. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The U.S. Consumer Price Index (CPI) excluding food and energy rose **0.3% month over month** in January. This matched the **0.3%** forecast. This measure is known as **core inflation**. It removes food and energy prices and tracks monthly price changes across a broad basket of goods and services. With January core inflation coming in at **0.3%**, exactly as expected, a key source of market uncertainty is now off the table. This supports our view that disinflation is continuing in a slow, steady way—but not fast enough to force the Federal Reserve to act. In the near term, this should ease bond market swings and support a “business as usual” backdrop. This in-line result also makes a **March rate cut** very unlikely. Fed funds futures now price **less than a 20%** chance of a cut next month. We think this strengthens the Fed’s post-meeting message to **wait and see**, and it likely pushes the first cut to **May or June at the earliest**. That is a meaningful shift from the more optimistic timing we were pricing in during **Q4 2025**. For derivatives traders, the near-term effect is likely **lower short-dated implied volatility**, especially with the **CBOE VIX Index** already trading below **15** this morning. That creates an opening to **sell premium** on broad equity indices, since the odds of a major policy surprise in the next few weeks have fallen. Expect more **range-bound trading** in the S&P 500, which makes strategies like **iron condors** more appealing. In context, this steady print is a welcome contrast to the inflation scares we saw in **fall 2025**, when a couple of hotter-than-expected reports briefly pushed yields sharply higher. Today’s data supports the idea that the underlying trend is still moving down—just not in the straight line some investors hoped for. Getting to **2% inflation** will likely remain a slow grind. Next, our attention shifts to upcoming **labor market** and **retail sales** data to judge the economy’s underlying strength. If the unemployment rate—last reported at **4.1%**—holds steady, the Fed has even more room to stay patient. Positioning should still allow for a **higher-for-longer** rate environment, potentially through options on **interest-rate-sensitive ETFs**.

here to set up a live account on VT Markets now

The United States Consumer Price Index (CPI), not seasonally adjusted, rose to 325.25 in January on a month-on-month basis. This was below the expected level of 325.41. Because January’s inflation data came in cooler than expected, we expect markets to adjust their view of Federal Reserve policy. Softer price pressure increases the odds of an earlier interest rate cut. Markets are already pricing this in: Fed funds futures now show a 70% chance of a rate cut by the June 2026 meeting, up from 50% yesterday. For equity index traders, this points to lower market volatility in the weeks ahead. The CBOE Volatility Index (VIX) has already dropped below 14 on the news, and it may fall further toward 12. Selling premium with strategies like iron condors or cash-secured puts on the SPX could benefit from both time decay and a further drop in implied volatility. This setup is similar to the second half of 2025, when softer inflation reports often led to rallies that lasted for weeks, especially in growth sectors. In that period, each downside CPI surprise triggered a strong rally in the Nasdaq 100. If yields keep falling, technology and other long-duration assets may outperform. Rate traders should watch the U.S. 2-year Treasury yield for the fastest reaction. It will likely move lower from its recent 4.1% area. That would signal the market is bringing forward its expected timeline for monetary easing. Futures tied to short-term rates should rise in this environment. Next, attention will turn to the upcoming employment report. If the labor market shows weakness along with cooling inflation, the case for a rate cut as early as the May meeting will strengthen. Any positions taken now should be reviewed after that key data release.

here to set up a live account on VT Markets now