Three months into the Iran conflict, the Strait of Hormuz remains closed, keeping an energy price shock in place. Even if a US–Iran deal were reached in the coming days, the shock is expected to persist for some time, leaving energy markets exposed to prolonged disruption rather than a quick normalisation.
For Switzerland, the pressure arrives soon after a recent US tariff shock has already weighed on the real economy. Scenario analysis is used to quantify the effect of higher energy prices on the output prices of key Swiss industries and to assess how competitiveness could shift relative to foreign peers as conditions evolve.
Persistent Energy Shock and Trading Opportunities
Given the persistent closure of the Strait of Hormuz, we believe energy prices will remain structurally high for some time. Brent crude has been trading consistently above $125 a barrel since the Strait was closed in March, a shock not seen since the early 2020s. This sustained price pressure presents clear trading opportunities in energy derivatives.
In the coming weeks, we are looking at buying long-dated call options on crude oil futures to capitalize on this environment. Given the heightened market volatility, using bull call spreads could also be a prudent way to manage risk on new positions. This strategy allows us to benefit from continued high prices while clearly defining our potential downside.
Impact on Swiss Industry and Trading Strategies
We expect Swiss industrial firms, which are heavy energy consumers, to face significant margin pressure. The latest Swiss manufacturing PMI has already fallen to 48.5, indicating a contraction and a sharp drop from the 54.2 reading we saw in January before these shocks hit. This signals a difficult operating environment for key Swiss equities.
Consequently, we are considering buying put options on the Swiss Market Index (SMI) or establishing pairs trades that are short Swiss industrials against long North American energy producers. The franc’s recent weakness against the dollar, now testing the 0.9500 level, further supports this bearish view on the domestic Swiss economy.
This combination of an energy shock and tariffs creates an environment of high uncertainty and market volatility. We expect the VIX index, which has been hovering around 25, to remain elevated or even spike higher. Trading strategies that benefit from this volatility, such as buying straddles on major indices, should be considered.
