Stocks hit record highs as energy futures retreat, options markets show signs of stress

From Yahoo Finance: 2025-06-29 10:00:00

Stocks hit record highs last week as energy futures retreated due to easing Middle East tensions. However, some options markets show signs of stress as investors prepare for potential geopolitical and macroeconomic upsets. Equity investors are getting more bullish in the short term, but longer-term optimism remains subdued. VIX futures indicate lingering economic concerns around tariffs. VIX call buying increased last week, while oil markets have yet to fully recover from Israel-Iran conflict. Brent implied volatility has fallen to early June levels, with no clear bullish or bearish bias. JPMorgan Chase & Co. suggests equity-oil hybrid trades, anticipating a rise in crude prices and a drop in stocks if Middle East stress returns. Hedge funds and large money managers reduced net-long positions in Brent crude futures and options, while trend-following Commodity Trading Advisors flipped to net shorts in the European natural gas market. Calendar spreads on crude oil have seen increased investor interest, with options open interest reaching a record high this month. The geopolitical risk premium has dropped due to recent experiences with major shocks without significant oil disruptions, Iran’s restrained response, and incentives to avoid disruptions from the US and China. Goldman Sachs analysts predict a likely shift to large inventory builds from the fall.



Read more at Yahoo Finance: Options Markets Show Traders Reposition as Mideast Tension Fades