Markets rally as tensions ease, but gold keeps investors cautious

Market Report

• Koen Hoorelbeke, Investment and Options Strategist, Saxo Bank

Summary: 

• Oil fell while gold climbed– on the same day. That usually doesn’t happen, and when it does it means the market is pricing two separate risk stories at once. Tuesday’s session saw the S&P 500 close at a fresh record while WTI crude pulled back from Monday’s Strait of Hormuz spike. Gold added 2%, not as a pure fear trade but as a persistent Hormuz risk premium that equity markets chose to temporarily set aside.

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.