Insights 
VT 
European countries are urged to play their part in addressing the issue of Russian oil sanctions. The United States considers implementing stronger sanctions on Russia, contingent upon similar actions from Europe.
Talks between China and the US may lead to an extension of the current tariff truce for another 90 days. Chinese negotiators understand the importance of de-risking trade relations with the US to prevent a future decoupling within the next 3.5 years.
TikTok Sale and Russian Oil Sanctions
China initially requested compensation linked to the TikTok sale, seeking tariff and export control benefits. Skepticism surrounds the potential for further sanctions on Russian oil, despite WTI crude rising by 70 cents to $63.39, remaining near the lower end of its range.
We believe the immediate risk of new, escalating tariffs between the US and China is fading for now. The prospect of another 90-day tariff truce suggests a period of relative calm is on the horizon. Consequently, we have seen market volatility expectations pull back, with the VIX index dropping from over 22 earlier this month to around 18.5 today.
For the energy markets, the hesitation to impose new sanctions on Russian oil purchases keeps a lid on prices. After the supply shocks we witnessed back in 2023, West Texas Intermediate crude has settled into a more predictable $60-$70 range for most of 2025. Last week’s EIA report, which showed a surprise build in crude inventories, further dampens the case for a significant price spike in the near term.
Equity Index Derivatives Favorable Environment
This environment could be favorable for equity index derivatives, as a pause in trade hostilities removes a major headwind for corporate earnings. The S&P 500 has already rallied on these developments, gaining over 60 points in the last five trading sessions. We are seeing particular interest in call options on technology and industrial sector ETFs, which are highly sensitive to US-China relations.
China’s long-term strategy of de-risking from the US over the next few years suggests they will likely favor stability in the short term. This aligns with their policy pivot towards strengthening the domestic economy, underscored by the stronger-than-expected 4.5% jump in August 2025 retail sales. This implies that while underlying tensions remain, we can expect a more measured approach from negotiators.
