Eurostoxx futures have decreased by 1.5% during early European trading due to rising tensions between Iran and Israel. Similarly, German DAX futures have dropped by 1.8%, while UK FTSE futures are down by 0.4%.

This defensive risk sentiment has also affected S&P 500 futures, which have dropped by 1.4%. The increased demand for safety has bolstered gold prices, keeping them strong in anticipation of the trading session.

Crude Oil Rise Amidst Middle East Tensions

WTI crude oil has shown a notable rise, trading at $73.25, up by 6.5% in response to fears of potential Iranian retaliation.

The current market reaction reflects wider anxiety sparked by concerns in the Middle East. We’re seeing pressure ripple through equity futures, with major indices across Europe slipping sharply. The DAX, often viewed as a barometer for Europe’s industrial strength, has fallen more than others, and that underscores how riskier assets are being sold off first.

On the other hand, the S&P 500 futures moving notably lower implies that this sentiment isn’t confined to regional dynamics—investors elsewhere are also pulling cash away from equities, particularly those linked to global trade or large-cap exposure. A sharp fall like this, in futures markets that typically price in news efficiently, points to active repositioning ahead of deeper instability.

Meanwhile, gold’s strength continues to build. This is not just a reaction to volatility; it indicates where capital is flowing. When something like gold holds up while everything else is backing off, it’s often an early indication that risk is being taken off the table in larger portfolios. Institutional positioning tends to favour such havens when uncertainty rises—there’s little interest in chasing yield when downside risks are growing.

Oil and Market Dynamics

Oil, naturally, is responding to regional threat perceptions. A 6.5% spike isn’t ordinary—it signals more than nervousness, suggesting that markets are factoring in at least the possibility of disrupted supply through broadening hostilities. WTI’s swift move higher speaks not just to fear but to a reassessment of logistics capacity and shipping security.

This is where the rhythm of volatility tends to accelerate. Once traditional safe havens attract heavy interest and energy contracts push upward to this extent, implied volatility can rise sharply across multiple asset classes—even those without any immediate geopolitical linkage. Therefore, this carries a direct signal about break-even levels for those holding option contracts tied to these indices.

For us, that means we need to closely observe whether VIX derivatives show a shift in skew over the next few sessions. If the balance tips too far in either direction, especially in fixed-strike positions below the spot levels, it could prompt further de-risking. We don’t want to get caught entering positions while tail risk coverage is still being priced—nothing will reprice faster than convexity once the narrative firms up.

Pay close attention to term structure—any steepening in the front-end against longer-dated expirations would indicate that the market sees risk as front-loaded rather than structural. In that case, pricing shorter-dated gamma becomes attractive, though one must account for bid-ask spreads that grow wider during these periods of uncertainty.

In our own book, we’re watching potential mispricing in long gamma near upcoming expiry windows. With underlying assets in flux and macro events compressing timelines, there may be windows for accumulating exposures that profit from directionless volatility, rather than betting on sustained trends that may not materialise.

From here, timing entries and exits will depend heavily on overnight session activity, particularly US Treasury flows and currency hedging patterns in Asia. Should those remain calm, the amplitude of futures market moves will likely moderate—but if we see overnight FX volatility spike, we’ll prepare for another European open with sharp price dislocations.

Trying to lean too early into any directional bias would be unwise. Better to let the screens tell their story first, then adapt strategies accordingly.

Create your live VT Markets account and start trading now.