Events in the Middle East have highlighted a profound shift in market dynamics. The very nature of volatility appears to be changing, requiring management strategies to adapt.
With a context that has once again become unstable, protecting portfolios must be a key priority. Tensions in the Middle East have served as a catalyst for a more structural shift in market behaviour.
The blockade of the Strait of Hormuz in early March – through which around 20% of the world’s oil is shipped – triggered a major supply shock. The price of a barrel of Brent crude quickly exceeded USD 100, approaching USD 120. This movement reignited inflationary fears and heightened volatility across all asset classes.
But beyond the initial shock, it is the market reactions that are striking. From mid-March onwards, equity markets demonstrated a particularly swift ability to rebound. In early April, several announcements of de-escalation prompted gains despite an energy environment that remained tense. The S&P 500 thus rose by around 7% in two weeks, illustrating the speed of positioning adjustments.
Reflective volatility
Equity markets generally fall sharply over a very short period: the bulk of the decline is often concentrated over just a few trading sessions, usually between two and five working days. Conversely, going back to pre-crisis levels takes longer: it usually takes several weeks – frequently four to eight – to fully recover from the correction. This dynamic reflects a marked asymmetry: downturns are abrupt and concentrated, whilst recoveries unfold gradually.
Since March 2026, this asymmetry appears to be fading: markets are absorbing easing scenarios more quickly, with almost immediate adjustments in asset and option prices. Rallies, supported by short-covering, systematic flows and sometimes thin liquidity, can now be as abrupt as the corrections themselves.
Volatility thus becomes fully two-sided: it no longer refers solely to downside risk, but also to increased directional uncertainty.
For investors, this calls for an update of risk management tools. Traditional hedges, focused on the ‘downside’, are showing their limitations in the face of extreme movements in both directions. Exposure to convexity through option strategies is therefore regaining its full significance, albeit at a higher carrying cost.
In an environment where markets can experience a turnaround in a matter of hours, the ability to adapt is crucial today.
More than just a temporary blip, the current situation could represent a lasting shift in the market landscape. For investors, it requires a reassessment of traditional analytical frameworks and the recognition of a new reality that can no longer be ignored: that of rapid, unpredictable and now symmetrical volatility.
The opinions expressed herein are correct as at 23 April 2026 and are subject to change without notice. This information should not be relied upon by the reader as research or investment advice regarding any particular fund, strategy or security. Past performance is not a guide to current or future results. Any forecast, projection or target, where provided, is indicative only and is not guaranteed in any way.
