Israeli Prime Minister Benjamin Netanyahu expressed concerns regarding Iran’s intensified production of ballistic missiles after previous damage from Israeli strikes. Plans are underway to brief then-US President Donald Trump on potential actions against Iran, according to knowledgeable sources.<\/p>\n
At the time of reporting, West Texas Intermediate crude oil rose by 0.54%, trading at $56.84 per barrel. Gold’s price increased by 0.59%, reaching $4,365.<\/p>\n
In financial markets, “risk-on” and “risk-off” terms indicate the willingness to take risks. In a “risk-on” market, there is more optimism, leading to increased purchases of risky assets. Conversely, “risk-off” markets trigger caution, favouring less risky assets.<\/p>\n
\u201cRisk-on\u201d conditions typically result in rising stock markets and commodities, apart from Gold, and strengthen currencies of commodity-exporting countries. During “risk-off” periods, there is a climb in Bonds, particularly government ones, increased appeal for Gold, and stronger safe-haven currencies like the yen, franc, and dollar.<\/p>\n
Currencies gaining strength in “risk-on” scenarios include the Australian, Canadian, and New Zealand dollars, along with currencies like the ruble and rand. In “risk-off” periods, the US dollar, Japanese yen, and Swiss franc generally appreciate due to their perceived safety.<\/p>\n
The growing tension between Israel and Iran is a major red flag for the markets as we head into the new year. We are seeing a classic “risk-off” scenario taking shape, as geopolitical uncertainty in the Middle East is rising once again. This situation demands that we prepare for increased market volatility in the coming weeks.<\/p>\n
We should consider long positions in oil derivatives, such as futures or call options on WTI and Brent crude. We remember how Brent crude prices shot up past $90 a barrel back in April 2024 during similar escalations. With WTI currently hovering near $88, any disruption to shipping in the Strait of Hormuz could easily push prices back into triple digits.<\/p>\n
An increase in market fear is almost certain, making long positions on the VIX index a smart hedge. Historically, the VIX, which is currently sitting around a calm 14, jumped over 35% in just a few days during the direct Israeli-Iranian exchanges last year. Buying VIX call options or VIX futures could offer significant protection if broader equity markets begin to sell off.<\/p>\n
The information points towards a flight to safety, which directly benefits traditional safe-haven assets. We should look at buying gold futures, as we saw gold rally over 8% to new highs during the tensions in early 2024. In the currency markets, this means going long on the US dollar and Japanese yen against commodity-linked currencies like the Australian dollar.<\/p>\n
On the other side of this trade, we should anticipate weakness in equity index futures. A risk-off environment will likely put pressure on markets like the S&P 500, which has seen a fairly stable climb since the inflation scare of 2023 finally subsided. It may be wise to purchase put options on major indices or reduce overall long exposure to stocks.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Netanyahu warns of Iran’s ballistic buildup; markets respond amid shifting “risk-on” and “risk-off” dynamics.<\/p>\n","protected":false},"author":62,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-37391","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t