S&P 500 Falls and Oil Surges as Traders Assess Iran Fallout
S&P 500 Falls and Oil Surges as Traders Assess Iran Fallout
Also, 10-year T-note, silver, crude oil and Japanese yen futures
- S&P 500 E-mini futures (/ES): -0.71%
- 10-year T-note futures (/ZN): -0.38%
- Silver futures (/SI): -0.17%
- Crude oil futures (/CL): +6.08%
- Japanese yen futures (/6J): -0.46%%
Israel launched a military operation against Iran last night, targeting nuclear enrichment and weaponization sites, military leaders and nuclear scientists. Although anticipated, the military operation shocked the market. The conflict is set to continue “for as many days as it takes to remove the threat,” according to Israeli Prime Minister Benjamin Netanyahu. Crude oil prices skyrocketed overnight, and risk assets fell.
| Symbol: Equities | Daily Change |
| /ESM5 | -0.71% |
| /NQM5 | -0.85% |
| /RTYM5 | -1.16% |
| /YMM5 | -1.25% |
S&P 500 futures (/ESM5) traded 1% lower in the first hour of US trading. The move aligns with the risk-off tone seen across global financial markets in response to the Israeli military strikes against Iran. Market leaders like Nvidia (NVDA) dropped, while defense stocks like Lockheed Martin (LMT) rose. Meanwhile, President Donald Trump urged Iran to make a deal “before it is too late.” Traders will likely remain risk-off into the weekend, as Israel is expected to conduct more operations. We also haven’t seen Iran’s response yet despite claims to the contrary.
| Strategy: (48DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
| Iron Condor | Long 5950 p Short 5975 p Short 6150 c Long 6175 c | 21% | +925 | -325 |
| Short Strangle | Short 5975 p Short 6150 c | 52% | +9750 | x |
| Short Put Vertical | Long 5950 p Short 5975 p | 61% | +345 | -905 |
| Symbol: Bonds | Daily Change |
| /ZTM5 | -0.12% |
| /ZFM5 | -0.25% |
| /ZNM5 | -0.38% |
| /ZBM5 | -0.77% |
| /UBM5 | -0.85% |
Bonds rose after the events in Iran unfolded. The surge in crude oil prices could put inflationary pressures back into the economy, which would complicate the Fed’s path to cut rates. This comes after this week’s inflation data that suggested the Fed would have a clearer path to cutting rates. Now, oil prices are saying, not so fast. 10-year T-note futures (/ZNU5) were down 0.38% in early trading today.
| Strategy: (42DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
| Iron Condor | Long 109.5 p Short 110 p Short 111.5 c Long 112 c | 33% | +328.13 | -171.88 |
| Short Strangle | Short 110 p Short 111.5 c | 56% | +1187.50 | x |
| Short Put Vertical | Long 109.5 p Short 110 p | 71% | +171.88 | -328.12 |
| Symbol: Metals | Daily Change |
| /GCQ5 | +1.28% |
| /SIN5 | -0.18% |
| /HGN5 | -0.95% |
Silver futures (/SIN5) were lower in early trading, but the metal managed to trim deeper overnight losses. The regional conflict has the potential to spiral out of control, which could dampen economic output and in turn hurt the silver demand component. Gold, meanwhile, accelerated higher as traders sought out safe-haven assets amid the conflict. The behavior pushed the gold/silver ratio higher for the week, but it remains lower than last week’s levels.
| Strategy (45DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
| Iron Condor | Long 35.5 p Short 35.75 p Short 37.5 c Long 37.75 c | 21% | +945 | 290 |
| Short Strangle | Short 35.75 p Short 37.5 c | 53% | +9900 | x |
| Short Put Vertical | Long 35.5 p Short 35.75 p | 59% | +545 | -705 |
| Symbol: Energy | Daily Change |
| /CLN5 | +6.08% |
| /HON5 | +6.24% |
| /NGN5 | +2.52% |
| /RBN5 | +3.57% |
Crude oil futures (/CLN5) jumped as high as 77.62 overnight as Israel launched strikes against Iran’s nuclear facilities. Prices pulled back in early trading, but oil remained nearly 6% higher after the first hour of US trading. Reports from Iran state that oil refining and storage facilities have not been damaged in the attacks. However, traders worry that regional disruptions will occur as the conflict continues.
| Strategy (63DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
| Iron Condor | Long 66.5 p Short 67 p Short 73 c Long 73.5 c | 24% | +380 | -120 |
| Short Strangle | Short 67 p Short 73 c | 65% | +7170 | x |
| Short Put Vertical | Long 66.5 p Short 67 p | 56% | +250 | -250 |
| Symbol: FX | Daily Change |
| /6AM5 | -0.49% |
| /6BM5 | -0.15% |
| /6CM5 | +0.07% |
| /6EM5 | -0.30% |
| /6JM5 | -0.44% |
Currency traders don’t seem too concerned this morning about Israel’s strike on Iran. Japanese yen futures (/6JM5) traded 0.44% lower, compared to overnight when the currency was up 0.5% immediately following the attacks. The likelihood that a broader conflict will ignite from the attack remains doubtful. This is evident for the markets, whereas crude oil prices reflect specific concerns that can arise from regional disruptions.
| Strategy (56DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
| Iron Condor | Long 0.0069 p Short 0.00695 p Short 0.0071 c Long 0.00715 c | 28% | +462.50 | -162.50 |
| Short Strangle | Short 0.00695 p Short 0.0071 c | 58% | +2175 | x |
| Short Put Vertical | Long 0.0069 p Short 0.00695 p | 66% | +275 | -350 |
Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx
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