Middle East Conflict Spurs Bullish Rush in Oil Options Market - BNN Bloomberg

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Bullish oil options contracts surged in value as the conflict between Israel and Hamas injected a fresh dose of volatility into a market that already had seen huge swings over the last week.

Call options, which profit from higher prices, surged relative to bearish put contracts for the Brent global crude benchmark on Monday. The difference between the two, known as the skew, was on track for its biggest one-day move since March 2022, when oil prices rocketed in the aftermath of Russia’s invasion of Ukraine.

Oil prices in New York surged as much as 5.4% on Monday as the conflict threatened political stability in the wider Middle East — the latest sharp swing in an oil market that has seen a tumultuous few weeks. Late last month, prices looked set to rally to $100 a barrel, before an ensuing sharp slump, driven by financial flows and demand concerns, saw them shed about $10 over a week.

The tumble led to a surge in options volatility last week as traders who had positioned for higher prices rushed to cover themselves when oil fell. That had caused the skew to surge in favor of puts, but the move reversed Monday. The price shift also showed up in volumes, with call trading outpacing that of puts significantly on Monday. About 154,000 Brent calls traded by 11:27am in New York, compared with 52,000 put options. Among the most actively traded contracts were calls for $100- and $110-a-barrel oil for December.The global sell-off in bonds is a sign of acceptance that higher interest rates will be around for longer, experts say, noting that the shift holds implications for borrowing rates and mortgage holders.

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