European equities sold off as fears grew over a possible resumption of conflict between the US and Iran, or the prospect of a renewed blockade. The move hit markets exposed to higher energy costs. Germany\u2019s Dax erased all of last week\u2019s gains, while the FTSE 100\u2019s attempt to reach 11,000 stalled again. In the US, the Dow Jones fell as the market priced in the risk of higher energy costs, although tech stocks attracted some dip buying after an earlier sell-off.<\/p>\n
Separately, an update involving Apple and Broadcom provided support to tech indices on an otherwise war-driven session. Broadcom\u2019s summer rally had faded, but a broader partnership with Apple helped to underpin sentiment and offered relief to a weakening share price.<\/p>\n
We see the looming conflict between the US and Iran as the main driver of market action, pushing energy costs sharply higher. Brent crude has already surged over 9% this week to trade above $102 a barrel, its highest level since the supply scares of late 2025. This forces us to consider buying put options on sectors most exposed to fuel costs, such as airlines and transport.<\/p>\n
European markets are being hit particularly hard, with the German DAX giving back all of last week\u2019s gains. The VSTOXX, which measures Eurozone equity volatility, has jumped nearly 30% in two days, signaling significant fear and making options protection more expensive. We believe selling out-of-the-money call spreads on the Euro Stoxx 50 is a prudent way to position for capped upside in the coming weeks.<\/p>\n
In the US, the Dow Jones is suffering, but we are seeing some resilience in technology stocks that have already sold off this quarter. This divergence is reminiscent of market action during previous geopolitical shocks, where investors seek perceived safety in growth-oriented tech names over cyclical industrial companies. This supports a strategy using futures to go long the Nasdaq 100 against a short position in the Dow.<\/p>\n
The specific news of a wider partnership between Apple and Broadcom is helping to bolster this tech-focused sentiment. Should the current hawkish rhetoric de-escalate, we could see a repeat of the sharp, tech-led rally of April 2025. We are therefore using the current weakness to slowly accumulate call options on the QQQ ETF, betting on a potential snap-back rally if tensions ease.<\/p>\n\n\n\n