Iran has continued to signal a military response after nine days of strikes, while also indicating that mediation efforts remain active. Foreign Ministry spokesman Esmaeil Baghaei said Tehran has received proposals from intermediaries intended to prevent a wider conflict, and he rejected the framing that Iran must choose between negotiations and war.
Baghaei added that talks aimed at halting US actions would continue even as Iran’s armed forces respond. This combination of military posture and an ongoing diplomatic channel has kept the situation characterised as managed but unstable, supporting oil prices after the recent strikes while offering only limited support to broader risk sentiment.
Oil Price Stability Amid Managed Instability
We are seeing Brent crude prices hold firm around the $80 mark as the delicate balance between Middle East diplomacy and military posturing continues. This managed but unstable environment means geopolitical risk premiums are here to stay for the coming weeks. We believe derivative traders must avoid directional complacency, as sudden headlines can easily trigger 5% intraday swings.
Trading Strategies For Volatile But Range-Bound Market
Given that the crude oil volatility index (OVX) remains elevated near 30%, we recommend focusing on option-selling strategies to capture high premiums. Specifically, we favor using wide strangles or iron condors to capitalize on this range-bound yet highly sensitive market. This approach allows us to benefit from time decay while keeping a safety buffer against sudden diplomatic shifts.
To hedge against a total breakdown in regional peace talks, we suggest holding out-of-the-money call options as a cheap insurance policy. Historical data shows that major geopolitical disruptions over the last two years have caused crude prices to spike by over 15% in less than a week. Using bull call spreads will help us limit upfront costs while maintaining exposure to these potential upside breakouts.
We must also keep a close eye on global inventory levels, which have decreased by an average of 1.2 million barrels per day recently. This physical tightness will provide a strong floor for Brent crude at around $75, even if diplomatic efforts successfully de-escalate the conflict. We should use these support levels to guide our strike selection for put options in the coming weeks.
