Markets Rally As Tensions Ease, But Gold Keeps Investors Cautious

(MENAFN- Mid-East Info) ** Koen Hoorelbeke**, ** Investment and Options Strategist** , Saxo Bank

Equities hit fresh records as Hormuz tensions ease, but gold’s persistent bid suggests the geopolitical premium has not fully left the room.

WTI crude pulled back from Monday’s Strait of Hormuz spike on Tuesday, as Washington signalled that a short-term naval corridor solution was in progress – freeing equity markets to focus on a strong earnings backdrop and push the S&P 500 to a fresh all-time closing record. Gold continued its recovery from the January highs, adding 2% on the session as the Hormuz risk premium held firm in commodity markets even as equities moved into relief-rally mode. This morning, South Korea’s KOSPI surged past 7,000 for the first time – up more than 7% as semiconductor giants Samsung Electronics and SK Hynix both hit record highs, adding a strong Asia tailwind to Wednesday’s session open. ** Headline driver**

WTI crude oil pulled back from Monday’s Strait of Hormuz spike on Tuesday, as Washington signalled that a short-term naval corridor solution was in progress – freeing equity markets to focus on a strong earnings backdrop and push the S&P 500 to a fresh all-time closing record. Gold continued its recovery from the January highs, adding 2% on the session as the Hormuz risk premium held firm in commodity markets even as equities moved into relief-rally mode. ** Market snapshot**

The S&P 500 rose 0.81% to close at a record 7,259.22, with technology leading – the Nasdaq 100 added 1.31% to finish at 28,015.06. Small caps outperformed: the Russell 2000 gained 1.75% to 2,845. WTI crude oil futures pulled back 1.93% to $100.30, retreating from Monday’s geopolitical spike, while gold futures added 2.04% to $4,661.90 – well below January’s all-time high near $5,600 but continuing a steady recovery – and silver added 3.63%. European indices closed firmly in the green: the Euro Stoxx 50 rose 1.84% and the DAX gained 1.71%. This morning, South Korea’s KOSPI surged past 7,000 for the first time – up more than 7% as markets reopened following a holiday, with Samsung Electronics and SK Hynix both at record highs on continued AI semiconductor demand.

** Market regime:** Low-vol bull. VIX 17.38, 20-day realised volatility 11.9% annualised, S&P 500 +6.19% above its 50-day moving average.

** Strategy insight – gold call overwriting as a vol-spread trade, not a yield play.** Gold at $4,661 and silver up 3.63% on Tuesday, yet equity implied volatility continues to compress. Gold options implied volatility tends to run structurally higher than equity vol during geopolitical stress, creating a spread between the two vol surfaces that experienced traders often examine. One way to engage that spread is through a covered call structure on a gold position – selling an out-of-the-money call at a strike the holder is comfortable capping gains at, in exchange for the option’s time value. The key variable is strike selection: too tight and the position gets called away in a continued rally; too wide and the premium collected is negligible. Neither outcome is costless, and the structure introduces its own risks – including early assignment and opportunity cost if gold moves sharply higher. ** Conclusion**

Heading into Wednesday’s session, the setup is a low-vol bull market with a live geopolitical wildcard: equities at records, VIX compressed, but gold’s persistent bid near $4,661 – recovering steadily from January’s $5,600 peak – and the KOSPI gapping past 7,000 this morning both signal that risk appetite is more nuanced than the headline calm suggests. Options traders working this environment are rewarded for income strategies – short vol, covered calls, iron condors – but the Hormuz situation and gold’s persistent bid are reminders that the tail risk has not been priced away, it has merely been temporarily set aside.

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