Insights 
VT 
US equities showed resilience on Monday following an initial pullback caused by the US bombing of Iranian nuclear sites. By lunchtime, the Dow Jones rose 0.16%, the S&P 500 increased 0.34%, and the NASDAQ advanced by 0.43%.
Concerns over potential Iranian retaliation had previously weighed on the markets. However, speculation emerged that Iran might refrain from immediate counterattacks, despite threats to close the Strait of Hormuz, a crucial route for over 20% of the world’s oil supply.
Oil Prices and Economic Factors
Oil prices saw a minor decrease, with WTI Oil ticking down less than 1% to $73.37. Economic factors contributed positively, with S&P Global’s PMI for manufacturing holding at 52, exceeding a 51 consensus, and existing home sales for May rising 0.8%, defying a -1.3% expectation.
Additional support came from Federal Reserve official Michelle Bowman’s comments favouring a rate cut possibly by July. Industry performances also played a role, as Boeing rose over 1% following aircraft safety revelations, while IBM and Tesla stocks experienced significant gains.
Markets opened the week on firmer ground, managing to shake off early fears tied to the airstrikes in Iran. After a hesitant morning, equities turned upwards as participants absorbed developments in the Gulf. The muted move in oil prices pointed towards a market pricing in more bark than bite—for the moment.
The earlier tension, sparked by military activity and heightened rhetoric around the Strait of Hormuz, lifted volatility temporarily. However, with no immediate reprisals and energy flows undisturbed, any expectation of sustained upheaval faded quickly through the session. Judging by recent volumes and option interest around crude contracts, we see positioning that hesitates to chase short-term panic.
Economic Data and Policy Signals
Economic data continued to provide a backstop. The S&P Global PMI sticking above 50 offers confirmation that manufacturing expansion persists, despite tighter financial conditions. Likewise, housing surprised to the upside, with existing home sales showing warming demand. The rebound here, particularly after such a weak forecast, lends stability to asset classes sensitive to yields and mortgage flows.
On the policy side, the tone from Bowman encouraged belief that easing could be on the table sooner than the market had priced just last week. With July now under review by sections of the market as the starting line for cuts, there’s emerging space for speculative upside—at least in the near-term. This doesn’t guarantee anything, of course, especially as views within the Fed remain split. But the dovish signal came through clearly enough for positioning to adjust.
Beyond macro and geopolitical inputs, specific sectors pulled their weight. Boeing’s move followed what we interpret as a partial resolution of confidence around long-standing safety concerns. That’s slightly paradoxical in timing, given the safety issues resurfaced in headlines just days earlier. However, it seems market participants took refreshed regulatory engagement as a step towards long-term resolution, not heightened scrutiny.
Tech and auto names also caught a strong bid. Tesla’s gain was driven largely by follow-through from forward delivery guidance and early enthusiasm around its software roadmap. Pair that with IBM’s surge—which we connect to unexpected strength in cloud margins—and it’s clear that bullish pockets are still aggressively sought when number beats line up with sector narratives.
From our side, we think any short-dated options strategies will remain highly sensitive to the ebb and flow of geopolitical developments, but two key readings—volatility selling and low out-of-the-money skew in indices—adhere to rangebound price action in the near term. Risk appetite hasn’t fully recovered, yet neither has it fractured.
As we monitor implied volatility curves, it’s apparent that near-expiry contracts are the first to absorb directional hedges on geopolitical risk. However, there’s reluctance to carry protection much further out. We’re watching to see if this eventually widens into a clearer trend. For now, the tactical bias leans towards selling implied richness at the top of a range and preferring spreads over outright delta-heavy positions.
Activity around rates vol also suggests a recalibration rather than a retracement—pricing suggests more weight being given to directional Fed easing within the quarter, rather than a 2025 reconsideration. That’s notable. Especially as the US dollar’s trajectory flattens and yield curve trades begin to show growing consensus around a summer pivot.
It’s a period where short-term noise will be frequent, but commitment to directional bets still feels restrained without confirmation of news flow breaking one way or the other. We’ll want to stay nimble, backing relative value and dislocations rather than betting the house on broader directional moves—at least for now.
