Options Brief - Iran Ceasefire Rally Summary (12 June 2026)
Author: Koen Hoorelbeke, Investment and Options Strategist
Summary
On June 12, 2026, markets experienced a significant risk-on reversal following President Trump's cancellation of planned military strikes on Iran. He indicated that a formal deal could be reached as early as the weekend, although Tehran had not confirmed this, leaving a gap between market optimism and reality.
Market Snapshot
The S&P 500 rose by 1.75% to 7,394, the Nasdaq 100 increased by 3.29% to 29,446, and the Dow Jones climbed 1.86% to 50,854. European indices also saw gains of 1.8-2.0%, while Asian markets surged, particularly Korea’s Kospi, which rose by 4.6%.
Crude oil prices fell, with WTI down 4.25% to $83.98 and Brent down 4.27% to $86.52, as the market began to price in a normalization of supply through the Strait of Hormuz. Gold surged by 3.20% to $4,246, and the 10-year Treasury yield dropped approximately 12 basis points to around 4.45%.
Volatility Overview
The VIX index closed at 19.44, reflecting a 12.5% drop, with further declines observed in early trading. The near-term volatility structure showed a notable inversion, indicating concentrated event risk due to the unconfirmed Iran deal and the upcoming FOMC meeting.
Strategy Insights
Two strategies were highlighted:
- Jade Lizard: This strategy aims to exploit the elevated put skew by combining a short out-of-the-money put with a short out-of-the-money call spread, capturing downside premium while capping upside risk.
- Long Straddle: Positioned for pre-event volatility expansion, this strategy profits from large moves in either direction and potential volatility increases leading up to major announcements.
Conclusion
The optimism surrounding the Iran ceasefire has led to a notable market rally, but the lack of confirmation from Tehran keeps geopolitical risk premiums alive. The current market conditions suggest a cautious approach as the gap between priced optimism and actual developments remains significant.