Implied Vols Collapse As Stocks Hit New Record High

2025-07-01 05:45:00 ET

By Mandy Xu

Cross-Asset Volatility: Implied volatilities fell across asset classes last week as geopolitical risk dissipated, and economic data came in better than expected. Oil was in the spotlight once again, after Iran and Israel agreed to a ceasefire. WTI 1M implied volatility fell over 17 pts wk/wk to 34% (now trading 20 pts below 1M realized vol at 55%) while oil skew has normalized back to flat (vs. the record inversion two weeks ago). Equity volatility fell as stocks notched a new record high, with the VIX® Index down 4.3 pts to a 4-month low of 16.3%. Rates vol declined on better inflation data, with VIXTLT down 9 pts to its lowest level since “Liberation Day”. Investors ramped up expectations of Fed rate cuts, with the OIS market now implying 2.5 cuts by year-end (vs. just 2 a week ago). Even gold, which had consistently screened as the richest cross-asset vol for the past few months, saw meaningful declines in volatility, with GLD 1M ATM vol down over 2.5 pts to 15.3%, closer to its long-term average. FX was the only asset class to see higher volatility, with 1M implied vol increasing across all the majors as the US Dollar Index fell to a new low. Both EURUSD and USDJPY 1M ATM vol gained ~0.5 vol pt as we approach the July 9 trade talk deadline. ...

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