Macro Volatility Digest

Implied volatilities are up across asset classes following the US/Israeli strikes on Iran over the weekend. Oil 1M implied volatility jumped 7 pts as oil prices spiked, with skew remaining extremely inverted (i.e. upside bid). As we noted last week, what’s unusual about this latest geopolitically-driven spike in oil prices is the positioning in long-dated oil options. While it’s not uncommon to see skew invert at the front-end of the curve, we’re seeing this extend to 6M options as well which hasn’t happened since the 2022 Russia/Ukraine war. Aside from geopolitics, we also saw a notable bid to credit volatility last week on the back of rising private credit fears, with VIXIG index gaining 10 pts wk/wk. For most of the past year, credit volatility has traded as the cheapest cross-asset vol, but that has changed in recent weeks (see chart). Rates and FX vols now screen as the cheapest. Learn more in this week’s Macro Volatility Digest.