The US Dollar pared losses and held just above 99.00 on Thursday after rebounding from 98.50 on Wednesday. Demand for the currency rose as markets reacted to doubts about an Iran ceasefire.
After the ceasefire announcement, Iranian authorities closed the Strait of Hormuz following an Israeli attack in Lebanon. The US and Israel said Lebanon was not part of the agreement, while Tehran reported breaches of three key clauses and questioned further talks.
Ceasefire Talks And Market Reaction
The process continued, with Washington and Tehran set to send delegations for direct talks in Pakistan on Saturday. US President Donald Trump warned of further “action” if Iran does not comply.
Minutes from the Federal Reserve’s March meeting showed a balanced approach. Rate cuts remain possible, but some officials also raised the chance of tightening for the first time since easing began in September 2024.
Later on Thursday, the US PCE Price Index is expected to show steady price pressures in February. Attention is on March CPI, with headline inflation forecast at 3.3% year on year, the highest in nearly two years, and core CPI seen at 2.7% from 2.5% in February.
A correction on April 9 at 09:05 GMT clarified that the easing cycle started in September 2024, not August 2024.
Trading Implications Under Rising Uncertainty
Given the fragility of the ceasefire in Iran, we should anticipate a sharp increase in market volatility. We saw during the Black Sea crisis in 2025 how the VIX, the market’s fear gauge, can surge above 35 in a matter of days. Buying VIX call options or at-the-money straddles on major indices like the SPX offers a direct way to profit from the rising uncertainty over the weekend talks.
The closure of the Strait of Hormuz is a critical chokepoint for global energy, accounting for about 21% of worldwide petroleum liquids consumption. This is reminiscent of the supply shock of late 2025, which caused Brent crude futures to spike over 15% in a single session. Traders should consider buying call options on crude oil futures or energy sector ETFs to position for a potential breakdown in negotiations.
The US Dollar is benefiting from both safe-haven demand and a potentially more hawkish Federal Reserve. The Dollar Index (DXY) pushing past 99 could be the beginning of a larger move; a failure in the Pakistan talks could easily see it challenge the 104 level we last saw during the global growth scare of 2025. Long positions in USD futures or call options against currencies with high energy import costs are looking attractive.
This week’s March CPI report is the key domestic catalyst, as it will be the first official reading of the war’s inflationary impact. We expect the 3.3% headline number to force the Fed’s hand, confirming that the inflation we battled through 2025 is not yet defeated. This outlook makes buying put options on Treasury bond ETFs like TLT a prudent hedge against the Fed delaying or reversing its rate cuts.
This combination of geopolitical risk and stubborn inflation creates a difficult environment for equities. The market is facing pressures similar to the 10% correction we navigated in the fall of 2025. We believe purchasing put options on the S&P 500 or Nasdaq 100 indices is a necessary defensive strategy to hedge portfolios against a significant downturn in the coming weeks.
