In a speech released early Monday in Asia, US President Donald Trump said US combat operations in Iran are ongoing. He said military action will continue until US objectives are achieved.
He said the US has hit hundreds of targets, including Revolutionary Guard facilities, air defence systems, nine ships, and a naval building. He repeated that combat operations continue.
Escalation And Strategic Signaling
Trump said there will likely be more US casualties and that the US will avenge the deaths of Americans. He said an Iranian regime equipped with long-range missiles and nuclear weapons would threaten Americans.
He said US lawmakers see no plan for Iran after the strikes. He urged the Revolutionary Guard, Iranian military, and police to lay down their arms and accept immunity or face death.
He called on Iranians to seize the moment and take back their country. He also told Iranians that America is with them.
The indefinite nature of these military operations immediately puts a significant risk premium on crude oil. We have already seen West Texas Intermediate futures jump over 8% to $95 a barrel, as the Strait of Hormuz, a chokepoint for nearly 20% of global supply, is now a contested zone. Traders should be positioned in near-term call options on crude and energy ETFs like XLE to capture this sustained volatility.
Volatility And Risk Positioning
This open-ended commitment is pure fuel for market uncertainty, which means we must be long volatility. The VIX index has already gapped up 25% to over 22 in overnight trading, a move reminiscent of the tensions in early 2025. We should be purchasing VIX calls with strikes in the 25-30 range, as any direct retaliation could send the index soaring.
General equity markets will face severe headwinds as investors de-risk their portfolios. S&P 500 futures are already pointing to a sharply lower open, so buying puts on major indices like the SPY is the primary defensive play for the coming weeks. We anticipate that growth-oriented tech and consumer discretionary sectors will underperform significantly.
Conversely, the explicit mention of continued strikes on numerous targets is a direct buy signal for the defense sector. We are adding to call option positions in companies like Raytheon and Lockheed Martin, which historically outperform during active conflicts as we witnessed in 2022. This rhetoric ensures a steady flow of government contracts and munitions replenishment orders.
The flight to safety is well underway, creating clear opportunities in traditional safe-haven assets. Gold has already surged past the key psychological level of $2,400 an ounce on this news, making calls on GLD a priority trade. Expect the US dollar to also strengthen against other major currencies as global capital seeks security.
