Geopolitics in Focus: Trading the Disruption

Foreword

The trades discussed in this report are related to the current market situation. They are intended to take advantage of short-term opportunities created by the ongoing U.S.–Israel conflict with Iran and the disruption to shipping through the Strait of Hormuz since February 28, 2026. These ideas are meant for near-term positioning and should not be seen as long-term investment recommendations.

The basic idea is that periods of conflict often create sharp, temporary price gaps between assets that benefit from the disruption and those that are adversely aected. Markets usually correct these imbalances once the situation stabilises. When tensions ease, a ceasefire is announced, or key supply routes reopen, the reasoning behind these trades will likely disappear — and positions should be reassessed or closed.

For that reason, these strategies should be approached as short-term opportunities with clear risk controls rather than positions intended to be held through a full market cycle. Geopolitical developments can shift quickly. A single diplomatic breakthrough, the resumption of safe tanker passage through Hormuz, or an increase in oil supply from OPEC could reverse several of these trades at once.

Investors should size positions carefully, stay attentive to developments in the region, and review the full risk disclaimer provided at the end of this report.

Geopolitical Trading Themes

Note - These are ratio trades and the same dollar amount value should be entered on the long and short side.

Heating Oil vs. Gasoline — Refined Products Trade
Long - Heating Oil Cash (HOIL) | Short - Gasoline Cash (GOIL)

This is a pair trade to capitalise on the high holding costs opportunity within derivatives of Crude oil. The trade involves going long on Heating Oil (Cash) and going short on Gasoline (Cash). The holding costs from the transactions come to +36.03% and +67.20%, respectively, at the time of writing.

Heating Oil and Gasoline have witnessed a strong correlation of 0.802 in the past 5 years, suggesting the strong hedge one instrument can provide in relation to the other, making it an attractive pair trade idea.

Heating Oil/Gasoline Ratio

Additionally, the Heating Oil/Gasoline Ratio chart on the Weekly Timeframe has retested the breakout of a long-term trendline formed by connecting the highs of October 2022, October 2023, and January 2025, indicating a bullish market structure.

Crude Oil vs. International Airlines Group — Potential Energy Shock Mean Reversion
Long - WTI Crude Oil Futures | Short - International Airlines Group (ICAG)

Date: 6 March 2026
Source: Bloomberg

The WTI/ICAG ratio just bounced off a five-year low of 0.1296 and sits at 0.2161 today, still well below its 2023 average of 0.40–0.50 and a fraction of the 1.0766 peak hit during the Ukraine energy shock. The Hormuz crisis is the catalyst — the WTI Crude/ICAG ratio could push meaningfully higher on a sustained disruption while ICAG gets squeezed on both sides: surging jet fuel costs and forced rerouting of its London–Gulf and Asia routes around the Cape of Good Hope. ICAG, through British Airways, operates one of the heaviest schedules of London–Gulf and London–Asia long-haul routes among European carriers, making it the most directly exposed single-stock expression of this disruption. The key unpriced risk is that sell-side FY2026 estimates were built on $70–75 oil and normal operations — when ICAG management quantifies the damage, the short leg re-prices hard. Mean reversion to the 2023 average alone represents a roughly 2x move in the ratio from current levels. Stop loss on a clean break back below 0.1296.

U.S. Energy Producers vs. Gold Miners — Diverging Commodity Fortunes
Long - Energy Select Sector SPDR ETF (XLE) | Short - VanEck Gold Miners ETF (GDX)

Date: 6 March 2026
Source: Bloomberg

Due to the US-Iran conflict in the Middle East, energy prices have surged. WTI oil has increased by nearly 20% this week. This benefits oil producers such as ExxonMobil and Chevron, which are major holdings in the ETF. Meanwhile, gold is on track to record its first weekly loss in nearly a month, as inflation risks and a stronger dollar serve as significant headwinds. For miners specifically, rising oil prices raise costs for fuel, transport, and operations. Since mining is energy-intensive, higher energy prices inflate production costs and reduce profit margins if commodity prices do not rise equally. Therefore, we expect miners to face challenges, while energy companies are likely to benefit if oil prices continue to climb. Technically, the ratio chart has shown a breakout of the trendline over the past few days. It currently stands at 0.55. The average of the ratio is around 0.72, implying the move has just started reverting to the mean.

U.S. Insurance vs. U.S. Airlines — A Geopolitical Divergence Play
Long - iShares U.S. Insurance ETF (IAK) | Short - U.S. Global Jets ETF (JETS)

Date: 6 March 2026
Source: Bloomberg

The Middle East conflict is pushing insurance premiums higher while hurting airline economics. Shipping firms have started imposing war-risk surcharges: Mediterranean Shipping Company introduced new fees from 5 Mar 2026, ranging from $500 per 20-ft container and $1,000 for refrigerated units on some routes, and up to $2,000 (20-ft), $3,000 (40-ft) and $4,000 (reefer) on others due to security risks and disruptions near key routes such as the Strait of Hormuz. As insurers reprice marine and cargo risk and some war-risk coverage is withdrawn, insurance companies (captured by IAK) benefit from higher premiums and placement activity, while airlines (JETS) face higher jet-fuel costs, operational disruptions and weaker travel sentiment.