Oil, Gold, and the US-Iran Geopolitical Breakthrough
Given the breakthrough US-Iran agreement, we see the sharp drop in oil prices as the dominant market force for the next few weeks. We are looking to build short positions in crude oil, likely using futures contracts or buying put options. History shows these geopolitical thaws have lasting impact; the lead-up to the 2015 Iran nuclear deal, for instance, contributed to oil prices falling by over 50% in the surrounding year. The collapse in oil directly weakens the US dollar and eases inflation fears, creating a perfect storm for gold. We believe gold’s rally has further to run and are considering call options to target the $4,454 level. This view is bolstered by strong fundamental demand, as recent World Gold Council data for Q1 2026 showed central banks continued their aggressive buying, adding a net 290 tonnes to their reserves.Market Positioning Ahead of the Fed and Broader Equity Outlook
This Wednesday’s Federal Reserve meeting is now the critical event, especially as it is the first under new Chair Kevin Warsh. While the market now expects a dovish pivot, the uncertainty of new leadership is high, making volatility plays attractive. The VIX is currently sitting near a low of 13, suggesting options that profit from a large market move in either direction, such as straddles on the SPY, are underpriced heading into the announcement. While lower energy costs should support equities, we are cautious about chasing the broad market higher at these levels. The S&P 500’s forward price-to-earnings ratio is already elevated above 21, reflecting much of the recent optimism from AI investment. We would rather use derivatives to focus on specific sectors that benefit from lower energy and transportation costs instead of buying broad index calls.Start trading now — click here to create your real VT Markets account.
