Israel’s Security Cabinet met to discuss a possible ceasefire with Lebanon, according to a senior Israeli official cited by Reuters. The discussions come more than six weeks into a war with Hezbollah linked to a wider US-Israeli conflict with Iran.
Earlier on Wednesday, US President Donald Trump said the war with Iran could end soon. He urged people to watch for an “amazing two days”.
In market moves at the time of writing, West Texas Intermediate (WTI) crude was down 1.85% on the day. It was trading at $87.45.
We look back at the events of late 2025 as a key lesson in how quickly geopolitical risk premiums can evaporate from the market. The reports of a potential Israel-Lebanon ceasefire, tied to a broader cooling of the US-Iran conflict, directly pushed WTI crude down from its highs. That drop to the mid-$80s showed that the path to peace is just as powerful a market mover as the threat of war.
The most important takeaway for us was the collapse in implied volatility in the energy markets following that news. The CBOE Crude Oil Volatility Index (OVX), which had been elevated in the high 40s during the conflict, plummeted to the low 30s by the end of that year. This rewarded traders who were positioned to benefit from falling volatility, such as those selling options.
Now, in April 2026, the situation has evolved. Tensions in the Middle East have remained low, but new pressures are emerging as recent OPEC+ production data shows compliance with cuts has reached 115%, tightening supply more than anticipated. This has helped put a floor under oil prices, with WTI now trading steadily around $78 per barrel.
Given that the market has priced out much of the old geopolitical risk, we should be watching for new sources of volatility. With summer driving season approaching and inventories tighter than they were a year ago, buying long-dated call options offers a defined-risk way to position for a potential supply-driven price spike. We should remain nimble, as the memory of 2025 shows how rapidly the narrative can shift based on a single headline.
