Insights 
VT 
The major US indices closed just off their highs as the market navigated tensions from the US entering the Iran/Israeli conflict. Initial boosts came from lower rates and expectations that weekend bombings might prompt Iran to negotiate.
Fed’s Bowman’s comments, echoing Fed’s Waller, suggested a preference for a July cut if inflation remains stable. Chances for a July cut increased to 23%, while the likelihood of a September cut was over 80%. Iran’s decision not to block the Strait of Hormuz indicated a move away from conflict.
Iran’s Symbolic Counterattack
The markets further rallied when Iran’s counterattack on a US military base in Qatar appeared more symbolic than aggressive. Iran’s warning, combined with missiles being intercepted without causing damage, eased tensions.
Final figures showed the Dow rising 374.96 points, or 0.89%, to 42,581.78. The S&P index increased by 57.33 points, or 0.96%, to 6,025.17, and the NASDAQ index rose 183.56 points, or 0.94%, to 19,630.97. The S&P closed above its 100-hour moving average, testing the 200-hour moving average at session lows. The NASDAQ also closed above its 100-hour moving average. If both remain above these averages, technical momentum may continue upwards.
What we’ve seen over the past session is a market grappling with lingering macro uncertainties, while at the same time clinging to technical support levels that offer short-term clarity for directional bias. The reaction to overseas events—tempered, but revealing—suggests participants were prepared for escalation but received something less disruptive. That alone helped stabilise sentiment, though only as long as tensions do not flare further.
From our viewpoint, the rebound late in the session should not be misread as a full reinstatement of risk appetite. What buoyed prices was not deep conviction, but rather a pullback in perceived geopolitical fallout. This is the sort of atmosphere where options pricing tends to widen intraday, liquidity in futures becomes more sensitive to headline flow, and price action gets exaggerated around known technical markers. We’ve already seen that in how moves around the 100- and 200-hour moving averages influenced positioning, particularly in the tech-heavy spaces.
Fed’s Rate Narrative
Bowman’s comments introduced a little more structure into the rate narrative. They effectively confirm that as long as incoming CPI data doesn’t push uncomfortably higher, a July rate adjustment is still on the table. It’s subtle reinforcement, but markets do respond to consistency in language—especially when the broader policy path is opaque. Waller’s earlier remarks paved the way; the reiteration simply nudged probability models to adjust. Futures linked to the Fed funds rate now reflect that shift quite clearly.
Derivatives traders need to continue balancing technical levels with forward-looking volatility pricing. While spot indices may appear to have momentum, much of this is being held together by both seasonally lower volume and hedges tied to policy expectations. What we must consider too is the role played by variance sellers, who will now reassess their risk appetite in light of continued unpredictability overseas.
There’s renewed interest in downside protection that wasn’t as apparent two weeks ago. We observed fresh flows into short-dated puts, particularly in the broader indices, suggesting that although markets closed higher, the underlying tone is one of alertness rather than enthusiasm. Callable spreads and vertical structures are being adjusted mid-week more actively than usual.
While the broader equity strength gives the appearance of calm, it’s the adjustment in volatility risk premium that deserves attention now. As long as implieds settle at these mid-range levels and realised volatility stays subdued, options market participants will price in containment—even if that’s only temporary.
We’re staying close to zones where profit-taking has consistently emerged this month. Short gamma exposure has built up near these levels, which—if breached with volume—could trigger flows that extend upside in a disorderly manner. In this context, patience matters more than usual. Speed of response will once again shift from central banks to traders themselves.
With the current tone in cross-asset correlation matrices and the strength in large-cap growth stocks, it’s more productive to limit outright directional trades and lean into delta-neutral strategies in the short window. The numbers indicate it’s not yet time to chase, but also not the moment to fade without a proper trigger.
In the days to come, calendar spreads around key expirations will bear watching. Short vol plays may offer yield, but only when executed with tight risk parameters and a clear event horizon.
