On February 28, 2026, as the joint US and Israeli attack began, the numbers on the screens started moving in ways that felt clinical, even as the reality on the ground with the tragic deaths of civilian casualties in Iran, felt anything but. Markets, as they say, do not have a moral compass, rather they have a weighing machine and right now, they are weighing the transition of the entire global economy from a "just-in-time" model to a "just-in-case" cycle.

What markets were signalling

On March 2, the index tape stayed cautious while defence rose. Historically, conflicts can speed up restocking and orders but how big it gets (and how fast) still depends on budgets, approvals and delivery bottlenecks.

The Winners

1. Hanwha Aerospace (012450.KS)

Hanwha is one of the more actively traded names linked to the “K-Defence” theme, a company markets increasingly view as a scalable supplier into a tightening global artillery and munitions cycle. Capacity and delivery credibility.

When replenishment becomes urgent, the ability to produce at scale often matters as much as the platform itself. Export demand tied to systems like the K9 Thunder and Chunmoo has reinforced the narrative of durable order flow even when outcomes still hinge on budgets, approvals and delivery timelines.

Key things that can move sentiment: order-book updates, production cadence, and any follow-on export announcements.

‍2. Northrop Grumman (NOC)

Northrop moved into focus as investors repriced exposure to strategic modernisation and large, long-running programs. Defence markets often seen as mission-critical can persist across cycles. It’s less about one quarter and more about whether momentum stays steady if modernisation priorities remain in place (and whether timelines shift if they don’t).

Key variables that can move sentiment: Procurement pace, contract timing, and program-related funding language.

3. RTX Corporation (RTX)

RTX returned to the centre of the tape as investors priced an interceptor replenishment cycle and the economics of high-tempo air defence. Attrition is expensive and when usage rates rise, governments typically have to replenish inventories and, in many cases, fund production expansion which can extend backlog and lift revenue visibility.

Key variables that can move sentiment: Replenishment orders, manufacturing expansion indicators, and delivery throughput.

4. Lockheed Martin (LMT)

Lockheed drew attention as markets focused on missile-defence demand and the question every procurement desk faces in a high-tempo environment: how fast can inventories be rebuilt? If utilisation stays elevated, the winners tend to be the contractors best positioned to scale production and deliver reliably. Lockheed’s missile defence exposure keeps it closely tied to that replenishment narrative.

Key variables that can move sentiment: production ramp signals, unit economics, and budget-driven order cadence.

5. BAE Systems (BA.L)

With an £83.6 billion backlog and a central role in the AUKUS submarine program, BAE moved into focus as parts of Europe signalled higher defence spending ambitions. The stock rose 6.11% to a 52-week high amid a “risk-off” rotation, with traders watching AUKUS milestones and European air and missile defence procurement, including “Sky Shield”.

Key variables that can move sentiment: A potential catalyst is any clear step-up in German spending that lifts order flow across BAE’s European units, while key risks include a sharp spike in UK gilt yields, renewed pound sterling volatility, or “threat of peace” profit-taking.

The Losers: not every ‘war stock’ rises

6. AeroVironment (AVAV)

AeroVironment surged 18% at the open before falling 17% intraday after reports that the US Space Force was reopening a US$1.4 billion contract. The move highlights how procurement processes and contract risk can drive volatility, even in supportive thematic environments.

7. Kratos Defence (KTOS)

Kratos sits in the drone and loitering munition theme that gained attention as the Middle East conflict intensified. The stock still sold off after earnings, highlighting a common defence-sector risk. Kratos announced a large follow-on equity offering in the US$1.2 billion to US$1.4 billion range, the move strengthens the balance sheet and can support future program investment.

For traders focused on short-term “conflict premium” narratives, dilution can quickly change the setup. Even when demand conditions appear supportive, the market may reprice the stock if each shareholder ultimately owns a smaller portion of the business.

8. Intuitive Machines (LUNR)

Some speculative space-tech names lagged as investors appeared to favour companies with more established defence-linked revenue.

9. Boeing (BA)

Boeing was down around 2.5% on the session. While its defence division is meaningful, its commercial business can be more sensitive to aviation demand, airspace disruptions and oil-price moves.

10. Spirit AeroSystems (SPR)

Spirit AeroSystems remains closely tied to the global aircraft production cycle as a major aerostructures supplier. Recent results showed widening losses despite higher sales, reflecting ongoing production cost increases on major aircraft programs. These pressures have weighed on investor confidence in the near-term outlook. The planned acquisition by Boeing may ultimately reshape the company’s position in the supply chain, but execution risk and production stability remain central to how the market prices the stock.

What to watch next

• Escalation vs de-escalation: A shift toward diplomacy or ceasefire discussions can quickly change sentiment around defence stocks.
• Oil and shipping: Energy spikes can tighten financial conditions and pressure cyclical sectors.
• ‍Budgets and awards: Price moves can sometimes precede contract decisions, with clarity arriving when awards are finalised.
• ‍Production capacity: Companies with proven production and delivery track records often attract the most investor attention.
• Supply chain constraints: Rare earths, propulsion and electronics remain potential bottlenecks that can limit how quickly production scales.

The longer term lens

The 2026 Iran conflict is first and foremost a human tragedy. For markets, it may also represent a shift in how national security spending is prioritised within fiscal frameworks. If defence spending remains elevated over a multi year horizon, companies with scalable manufacturing capacity and integrated technology stacks could attract sustained investor attention. That said, markets move in cycles. Structural themes can persist, but they can also reprice quickly when assumptions change. Staying analytical and risk aware remains critical.

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^{References to specific companies, sectors or market movements are provided for general market commentary only and do not constitute a recommendation, offer or solicitation to buy or sell any financial product.Market reactions to geopolitical or macroeconomic events can be volatile and unpredictable, and outcomes may differ materially from expectations.}

Volatility doesn't discriminate. But it can punish the unprepared. 

Stops getting hit on moves that reverse within minutes. Premiums on short-dated options climbing. And the yen no longer behaving as the reliable hedge it once was.  

For traders across Asia, navigating this environment means asking harder questions about risk, timing, and the assumptions baked into strategies built for calmer markets.

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1. How do I trade VIX CFDs during a geopolitical shock?

The CBOE Volatility Index (VIX) measures the market’s expectation of 30-day implied volatility on the S&P 500. It is often called the “fear gauge.” During geopolitical shocks such as the current Iran escalations, sanctions announcements, and surprise central bank actions, the VIX can spike sharply and quickly.

What makes VIX CFDs different in a shock

VIX itself is not directly tradeable. VIX CFDs are typically priced off VIX futures, which means they carry contango drag in normal conditions. 

During a geopolitical shock, several things can happen at once

• Spot VIX may spike immediately while near-term futures lag, creating a disconnect.
• Spreads on VIX CFDs can widen significantly as liquidity thins.
• Margin requirements may change intraday as broker risk models adjust.
• VIX tends to mean-revert after spikes, so timing and duration are critical.

What this means for Asian-hours traders

Asian market hours mean many geopolitical events can break while local traders are active or just starting their session. 

A shock that hits during Tokyo hours may already be priced into VIX futures before Sydney opens.

Some traders use VIX CFD positions as a short-term hedge against equity portfolios rather than a directional trade. Others trade the reversion (the move back toward historical averages once the initial spike fades). Both approaches carry distinct risks, and neither guarantees a specific outcome.

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2. Why are my 0DTE options premiums so expensive right now?

Zero days-to-expiry (0DTE) options expire on the same day they are traded. They have become one of the fastest-growing segments of the options market, now representing more than 57% of daily S&P 500 options volume according to Cboe global markets data.

For Asian-based participants accessing US options markets, elevated premiums during volatile periods can feel like mispricing, but usually reflects structural pricing factors.

Why premiums spike

Options pricing is driven by intrinsic value and time value. For 0DTE options, there is almost no time value left, which might suggest they should be cheap but the implied volatility component compensates for that.

When uncertainty increases, sellers may demand greater compensation for the risk of sharp intraday moves. 

This can be reflected in

• Higher implied volatility inputs.
• Wider bid-ask spreads.
• Faster adjustments in delta and gamma hedging.

In higher-VIX environments, hedging flows can contribute to short-term feedback loops in the underlying index. This can amplify price swings, particularly around key levels.

What this means for Asian-hours traders

Many 0DTE options contracts see their most active pricing and hedging flows during US trading hours. Entering positions during the Asian session may mean facing stale pricing or wider spreads.

If you are seeing expensive premiums, it may reflect the market accurately pricing the risk of a large same-day move. Whether that premium is worth paying depends on your view of the likely intraday range and your risk tolerance, not on the absolute dollar figure alone.

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3. How do I adjust my algorithmic trading bot for a high-VIX environment?

Many algorithmic trading systems are built on parameters calibrated during lower-volatility regimes. When VIX spikes, those parameters can become outdated quickly.

The regime mismatch problem

Most trading algorithms use historical data to set position sizes, stop distances, and entry thresholds. That data reflects the conditions during which the system was tested. If VIX moves from 15 to 35, the statistical assumptions underpinning those settings may no longer hold.

Common failure modes in high-VIX environments include

• Stops triggered repeatedly by noise before the intended directional move occurs.
• Position sizing based on fixed-dollar risk, which becomes relatively small compared to actual intraday ranges.
• Correlation assumptions between assets breaking down.
• Slippage on execution that erodes edge.

Approaches some algorithmic traders consider

Rather than running a single fixed set of parameters, some systems incorporate a volatility regime filter. This is a real-time check on VIX or ATR that triggers a switch to different settings when conditions shift.

Approach adjustments that some traders review in high-VIX environments

• Widen stop distances proportionally to ATR to reduce noise-driven exits.
• Reduce position size to maintain constant dollar risk relative to wider expected ranges.
• Add a VIX threshold above which the system pauses or moves to paper trading mode.
• Reduce the number of simultaneous positions, as correlations tend to rise during market stress.

No adjustment eliminates risk. Backtesting new parameters on historical high-VIX periods can provide some indication of likely performance, though past conditions are not a reliable guide to future outcomes.

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4. Is the Japanese Yen (JPY) still a reliable safe-haven trade?

During periods of global risk aversion, capital has historically flowed into JPY as investors unwind carry trades and seek lower-volatility holdings. However, the reliability of this dynamic has become more conditional.

Why has the yen historically moved as a safe haven?

Japan’s historically low interest rates made JPY the funding currency of choice for carry trades and when risk-off sentiment hits, those trades unwind quickly, creating demand for yen.

Additionally, Japan’s large net foreign asset position means Japanese investors tend to repatriate capital during crises, further supporting JPY.

What has changed

The Bank of Japan’s shift away from ultra-loose monetary policy in recent years has complicated the traditional safe-haven dynamic. 

As Japanese interest rates rise:

• The scale of carry trade positioning may change.
• USD/JPY can become more sensitive to interest rate spreads.
• BoJ communication and domestic inflation data may influence JPY independently of global risk appetite.

The yen can still behave as a safe haven, particularly during sharp equity sell-offs. But it may respond more slowly or inconsistently compared to earlier cycles when the policy divergence between Japan and the rest of the world was more extreme.

What to watch

For traders monitoring JPY as a safe-haven signal, BoJ meeting dates, Japanese CPI releases, and real-time US-Japan rate spread data have become more relevant inputs than they were a few years ago.

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5. How do I avoid ‘whipsawing’ on energy CFDs?

Whipsawing describes the experience of entering a trade in one direction, getting stopped out as the price reverses, then watching the price move back in the original direction.

Energy CFDs, particularly crude oil, are especially prone to this in volatile markets. And for traders in Asia, the combination of thin liquidity during local hours and sensitivity to geopolitical headlines can make this particularly challenging.

Why energy CFDs whipsaw

Crude oil is sensitive to a wide range of headline drivers: OPEC+ production decisions, US inventory data, geopolitical supply disruptions, and currency moves. 

In high-volatility environments, the market can react strongly to each headline before reversing when the next one arrives.

• Price spikes on a headline, stops are triggered on short positions.
• Traders re-enter long, expecting continuation.
• A second headline or profit-taking reverses the move.
• Long stops are hit. The cycle repeats.

Approaches traders may consider to manage whipsaw risk

Some traders choose to change their risk controls in volatile conditions (for example, reviewing stop placement relative to volatility measures). However these may increase losses; execution and slippage risks can rise sharply in fast markets

Other approaches that some traders review:

• Avoid trading crude oil CFDs in the 30 minutes before and after major scheduled data releases.
• Use a longer timeframe chart to identify the prevailing trend before entering on a shorter timeframe, reducing the chance of trading against larger institutional flows.
• Scale into positions in stages rather than committing full size on initial entry.
• Monitor open interest and volume to distinguish between moves with genuine participation and low-liquidity fakeouts.

Whipsawing cannot be eliminated entirely in volatile energy markets. The goal of risk management in these conditions is not to predict which moves will hold, but to ensure that losses on false moves are smaller than gains when a genuine directional move follows.

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Practical considerations for volatile Asian markets

Asian markets carry structural characteristics that interact with volatility differently from US or European markets:

• Thinner liquidity during local hours can exaggerate moves on thin volume, particularly in energy and FX CFDs.
• Events in China, including PMI releases, trade data, and PBOC policy signals, can move regional indices.
• BoJ policy decisions have become a more active driver of JPY and Nikkei volatility in recent years.
• Overnight gaps from US session moves are a persistent structural risk for traders unable to monitor positions around the clock.
• Margin requirements on leveraged products can change at short notice during high-VIX periods.

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Frequently asked questions about volatility in Asian markets

What does a high VIX reading mean for Asian equity indices?

VIX measures expected volatility on the S&P 500, but elevated readings typically reflect global risk aversion that flows across markets. Asian indices such as the Nikkei 225, Hang Seng, and ASX 200 can often see increased volatility and negative correlation with sharp VIX spikes.

Can 0DTE options be traded during Asian hours?

Access depends on the platform and the specific instrument. US equity index 0DTE options are most actively priced during US trading hours. Asian traders may face wider spreads and less representative pricing outside those hours.

Are algorithmic trading strategies inherently riskier in high-volatility conditions?

Strategies calibrated during low-volatility periods may perform differently in high-VIX environments. Regular review of parameters against current market conditions is prudent for any systematic approach.

Has the JPY safe-haven trade changed permanently?

The Bank of Japan’s policy normalisation has introduced new dynamics, but JPY has continued to strengthen during some risk-off episodes. It may be more conditional on the nature of the shock and the BoJ’s concurrent posture.

What is the best way to set stops on energy CFDs in high-volatility conditions?

There is no universally best method. Many traders reference ATR to calibrate stop distances to prevailing conditions rather than using fixed levels. This does not guarantee exit at the desired price and does not eliminate whipsaw risk.

Volatility has a way of showing up uninvited.

One day the ASX is drifting quietly... and the next, margin requirements rise, stops do not fill where expected, and portfolios open with uncomfortable overnight gaps.

If you have been searching for answers, you are not alone. Some of the most searched questions about volatility among Australian traders relate to margin calls, slippage, overnight gaps, leveraged exchange traded funds (ETFs), and tools such as average true range (ATR).

Here is what is happening.

Why this matters now

Global markets have become more sensitive to interest rates, inflation data, geopolitics and technology-driven flows. When liquidity thins and uncertainty rises, price swings widen. That is volatility.

And volatility doesn’t just affect price direction, it changes how trades are executed, how much capital is required, and how risk behaves beneath the surface.

Translation: Volatility is not just about bigger moves, rather, it’s about faster moves and thinner liquidity - that’s when the mechanics of trading matter most.

Want a real-world volatility case study?

Why did my broker increase margin requirements?

One of the most searched questions about volatility is why margin requirements increase without warning.

When markets become unstable, brokers may increase margin requirements on contracts for difference (CFDs) and other leveraged products. Larger price swings can increase the risk of accounts moving into negative equity thus raising margin requirements reduces available leverage and can help manage exposure during extreme conditions.

What this can mean in practice

-A margin call may occur even if price has not moved significantly.
-Effective leverage can drop quickly.
-Positions may need to be reduced at short notice.

Margin adjustments are typically a response to changing market risk, not a random decision. In highly volatile markets, it is prudent to assume margin settings can change quickly, therefore many traders choose to review position sizes and available buffers in light of that risk.

What is slippage and why didn’t my stop fill at my price?

Another frequently searched topic is slippage.

Slippage can occur when a stop order triggers and is executed at the next available price, the outcome can depend on the order type, market liquidity and gaps. In calm markets, the difference may be small whereas in fast markets, prices can gap beyond the stop level.

Common drivers include

-Major economic or earnings releases.
-Thin liquidity.
-Crowded stop levels.
-Overnight sessions.

Stop-loss orders generally prioritise execution rather than price certainty and during periods of high volatility, this distinction becomes important. Adjusting position size and placing stops with reference to typical price movement may be more effective than simply tightening stops in unstable conditions.

How do I manage overnight gapping on the ASX?

Australia trades while the United States sleeps, and vice versa. This time zone difference is, sadly, one reason overnight gap risk is frequently searched by Australian traders. If US markets fall sharply, the ASX may open lower the following morning, with no opportunity to exit between the close and the open.

Examples of risk-management approaches market traders may use include

-Index hedging using ASX 200 futures or CFDs*.
-Partial hedging during high risk events.
-Reducing exposure ahead of major macro announcements.

Hedging can offset part of a move, but it introduces basis risk as individual stocks may not move in line with the broader index.

There is no perfect protection, only trade-offs between cost, complexity and risk reduction.

^{*CFDs are complex instruments and come with a high risk of losing money due to leverage.}

What are the key risks of leveraged or inverse ETFs in volatile markets?

Leveraged and inverse ETFs are often searched during periods of heightened volatility.

While these products typically reset daily, they aim to deliver a multiple of the index’s daily return, not its long-term return. In a volatile, sideways market, daily compounding can erode value even if the index finishes near its starting level.

This occurs because gains and losses compound asymmetrically. A fall of 10 percent requires a gain of more than 10 percent to recover. When that effect is multiplied daily, outcomes can diverge materially from the underlying index over time.

Such instruments may be used tactically by some market participants. They are generally not designed as long-term hedging tools and understanding their structure is essential before using them in a strategy.

How can ATR be used to inform stop placement?

Average true range (ATR) is a commonly used indicator for measuring volatility.

ATR estimates how much an asset typically moves over a given period, including gaps. Rather than setting a stop at an arbitrary percentage, some traders reference ATR and place stops at a multiple, such as two or three times ATR, to reflect prevailing conditions.

When volatility rises, ATR expands and that can imply wider stops or smaller position sizes if overall risk is to remain constant. The shift is from asking, “How far am I willing to lose?” to asking, “What is a normal move in current conditions?"

Practical considerations in volatile markets

During periods of elevated volatility, traders may consider

• Allowing for the possibility of margin changes

• Sizing positions conservatively if volatility increases

• Recognising that stop-loss orders do not guarantee a specific exit price

• Reviewing exposure ahead of major economic events

• Understanding the daily reset mechanics of leveraged ETFs

• Using volatility measures such as ATR to inform stop placement

• Maintaining adequate cash buffers

Volatility does not reward prediction alone. Preparation and risk awareness may assist traders in understanding potential risks, but outcomes remain unpredictable.

Read: Global volatility and how to trade CFD

What this means for Australian traders

Australian markets face specific structural considerations cpmapred to Asian and US Markets. Overnight gap risk is influenced by US trading hours and resource heavy indices such as the ASX can respond quickly to commodity price movements and data from China. Currency exposure, including AUD and US dollar (USD) moves, can add another layer of variability.

Volatility is not uniform across regions. It behaves differently depending on market structure and liquidity depth.

Frequently asked questions about volatility

What causes sudden spikes in market volatility?
Interest rate decisions, inflation data, geopolitical developments, earnings surprises and liquidity constraints are common triggers.

Why do brokers increase margin during volatile markets?
To reduce leverage exposure and manage risk when price swings widen.

Can stop-loss orders fail during volatility?
They can experience slippage if markets gap beyond the stop level, meaning execution may occur at a worse price than expected. In fast or illiquid markets, this difference can be significant.

Are leveraged ETFs suitable for long term hedging?
They are generally structured for short-term exposure due to daily resets. Whether they are appropriate depends on your objectives, financial situation and risk tolerance.

How can volatility be measured before placing a trade?
Tools such as ATR, implied volatility indicators and historical range analysis can help quantify prevailing conditions.

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^{Risk warning: Periods of heightened volatility can lead to rapid price movements, margin changes and execution at prices different from those expected. Risk-management tools such as stop-loss orders and volatility indicators may assist in assessing market conditions but cannot eliminate the risk of loss, particularly when using leveraged products.}