Oil prices are rising, but the market’s response is muted. Judging by the VIX index, have we already passed the peak of panic and selloff?

The United States announces a blockade of a key shipping lane, the Strait of Hormuz, causing international crude oil prices to rise significantly; however, the pullback in global stock markets has been relatively limited. The VIX index, which measures market fear, has reacted mildly. Does this mean the market has already passed the peak of panic and selling pressure? Most investors have gradually started to price in geopolitical risk.

The United States announces a blockade of the Strait of Hormuz; oil prices rise again, breaking $100

The Strait of Hormuz is a crucial choke point for global crude oil transport. Its blockade directly intensifies market expectations of tighter energy supply. Data show that U.S. West Texas Intermediate crude oil futures rose more than 8% in a single day to $104.93 per barrel, while Brent crude also rose 7% to $102.17 per barrel; since the outbreak of the conflict, crude oil prices have cumulatively increased by more than 55%.

Stock markets react mildly, with the VIX index not rising sharply

Compared with the increase in oil prices, global stock markets have responded moderately. Losses in major Asian stock markets and U.S. index futures have generally been around 1%. The market volatility indicator (VIX) shows that fear sentiment has retreated from its high point. Investors are gradually treating parts of the most extreme policies as negotiation tactics, meaning the selling pressure on the stock market is not as heavy as expected.

Analysts believe that the worst period of panic may already be over. From now on, the market will truly try to self-correct.

The worst period of panic may already be over; current stock market positioning is favorable for a rebound

As the geopolitical situation stabilizes, even if volatility still exists in the short term, oil prices will ultimately fall. Michael Yoshikami of Destination Wealth Management says that the United States and Iran will ultimately reach a resolution through negotiations, which could quickly eliminate the current risk premium. He also expects oil prices to drop again to $80 per barrel.

Standard Chartered Bank also believes the United States is seeking a path to ease the situation. The recent rise in oil prices and the pullback in the stock market are just temporary phenomena. As long as conditions do not significantly worsen, the stock market should continue to rise in the short term.

This article Oil prices rise; the market response is muted—looking at the VIX index, has the peak of panic and selling already been reached? First appeared on Chain News ABMedia.