Cross-Asset Vols Spike On Iran Risk As Oil Surges

2026-03-02 12:19:00 ET

By Mandy Xu

Cross-Asset Volatility: Implied volatilities are up across asset classes following the US/Israeli strikes on Iran over the weekend, as the conflict escalated in the region. Oil prices surged higher, up 8% this morning, with tanker traffic in the Strait of Hormuz essentially halted (the Strait handles a fifth of global oil shipments typically). Oil 1M implied volatility jumped 7 pts to near a 1-year high of 60%, while skew remains extremely inverted (i.e., calls trading at a premium to puts) as investors position for further upside in oil. As we noted last week , what’s unusual about this latest geopolitically driven spike in oil prices is the positioning in longer-dated options. While it’s not uncommon to see skew invert at the front end of the curve, we’re seeing this extend to longer-dated options as well, with WTI oil 6M skew also inverting last week – that hasn’t happened since the 2022 Russia/Ukraine conflict. Not surprisingly, haven assets are rallying this morning, with the US Dollar and gold both up. US Treasuries, notably, are not, with bond yields increasing as a result of higher inflation expectations. Aside from geopolitics, we’re also seeing a notable bid to credit volatility on the back of rising fears over private credit. VIXIG (IG credit vol) index jumped 10 pts last week to the highest level since last May, while the implied-realized spread also widened (see pg 2). For most of the past year, credit volatility has traded as the cheapest cross-asset vol, but that has changed in recent weeks (see Exhibit 1). Rates and FX vol now screen as the cheapest....

Read the full article on Seeking Alpha

For further details see: