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The geopolitical context has become significantly more tense in recent weeks, but for the markets — and particularly for volatility — not all tensions are created equal. A rigorous analysis requires distinguishing between political noise, narrative, and diplomatic posturing, and what is truly capable of constraining global liquidity and thus derailing a market regime dominated by short volatility.

For a non-specialist reader, this simply means that as long as volatility is deliberately kept low, the market operates according to artificial rules, and everything appears to be fine. Short volatility refers to strategies that bet on a calm market; they make money as long as fluctuations remain low and, in turn, they themselves contribute to preventing the market from moving. “Derailing a market regime dominated by short vol” does not mean causing a small decline or a bad session; it means breaking this self-perpetuating cycle. This only happens when something forces players to stop betting on calm: a liquidity problem, financing, real costs (energy, supply), or a constraint that forces them to cover themselves urgently. At that point, volatility can no longer be contained, stabilization mechanisms cease to function, and the market abruptly shifts from artificial calm to disorderly movement. In other words, it is not “bad news” that derails the system, but the physical impossibility of continuing to act as if the risk did not exist.

The case of Venezuela is emblematic. US intervention and increased pressure on the Maduro regime are part of a strategic continuity, not a break with the past. Venezuelan exports to China were already irregular, discounted, fragile, and largely integrated into parallel circuits (ghost fleet, ship-to-ship transfers, non-Western insurance). In other words, the global market — and Beijing in particular — was already operating on the assumption that these barrels were uncertain and not a structural component. Their interruption therefore caused no sudden supply shock, no lasting pressure on prices, and no stress on trade financing. Venezuela is no longer a key supplier: it is a residual variable. On its own, it poses no exogenous risk capable of derailing short-vol trade.

China's reaction to the US intervention in Venezuela confirms this interpretation. The Chinese statement is not a break with tradition: it is a standard, almost mechanical diplomatic reflex. The vocabulary used — condemnation, sovereignty, international law, respect for the UN Charter — is exactly the same as Beijing has been using for years whenever the US employs force outside a multilateral framework. There is no threat, no reference to concrete measures, no military signal, and not the slightest allusion to Taiwan. In other words, China is speaking out because it has to, for reasons of political consistency and international posture, not because it is preparing to take action. For the markets — and for short-vol trade — this is a message of containment, not escalation: the risk is verbalized and channeled, but nothing is changing in operational terms.

In the same vein, the recent announcement by the Chinese Ministry of Commerce to tighten controls on exports of dual-use goods to Japan is also part of a strategy of administrative pressure, not an immediate break. Beijing is deliberately broadening the scope of restrictions — military users, indirect uses, capacity building — using an existing legal framework. In the short term, this measure is not causing any visible shock: no sudden interruption in flows, no immediate tension on energy, no stress on rates or the dollar. But it adds further friction to Asian industrial chains, introduces regulatory uncertainty, and gradually increases the cost of trade financing. This is exactly the type of decision that does not change anything today, but contributes to a slow accumulation of real constraints — the kind of constraints that markets always end up discovering with a delay.

Donald Trump's repeated threats about Greenland follow a similar logic. The facts are well known: Trump has publicly mentioned, on several occasions, the United States' strategic interest in Greenland, going so far as to talk about increased control or acquisition, in the name of national security, of the Arctic and future shipping routes. These statements are striking and politically significant, but they will not have any short-term operational impact on current supply chains. Greenland is a long-term strategic issue, not an immediate critical hub for global energy or liquidity. For the markets, once again, the risk is narrative, not systemic.

The only geopolitical issue capable of radically changing the situation remains Iran. Unlike Venezuela, Iran is a systemic player in the global energy market, not only because of its volumes, but above all because of its geographical and logistical position. A lasting disruption to its flows does not act as an immediate emotional shock, but as a cost and financing shock. Transport routes become more complicated, insurance premiums skyrocket, freight costs rise, and alternatives become more expensive and less fluid. This type of shock is not immediately visible in the VIX, but it accumulates in the real world.

The mechanism is always the same. Higher energy costs translate into increased financing needs for manufacturers, refiners, and importers. Lead times lengthen, inventories tie up capital, and liquidity is sucked up by the simple need to keep the machine running. This tension then feeds back into the financial system: pressure on the dollar, on trade financing, on short-term rates, and on collateral. It is only at this stage—often with a delay—that the geopolitical shock becomes a liquidity shock, and thus a systemic shock for the markets.

This is precisely why, despite the noise surrounding Venezuela and Greenland, the short-haul trade continues to hold up. These events do not attack the heart of the system. Iran, on the other hand, has the potential to transform geopolitical tension into real pressure on the global supply chain, and then into financial pressure. From a geopolitical perspective, as long as this stage is not reached — i.e., as long as tensions do not translate into real constraints on supply, financing, or liquidity — volatility may remain subdued and markets may continue to ignore the headlines. This obviously does not rule out the possibility that another non-geopolitical event (financial, monetary, or liquidity-related) could cause a break in the system. But if this constraint takes hold, it will not be fear that breaks the system — it will be the physical impossibility of continuing to finance the real world without friction.

Finally, it is important to emphasize one key point: this short volatility trade is currently the main pillar supporting the equity markets. As long as volatility is sold, compressed, and managed intraday, the indices hold steady and sometimes even rise, even in the absence of volume, conviction, or good fundamental news. The decline in the VIX acts as a market lubricant: it reduces the cost of risk, prevents hedges from being activated, and mechanically forces certain players to remain exposed. This regime creates artificial stability, but one that is sustainable as long as it works, and it has been repeated almost mechanically for thirty-one consecutive sessions: every day, a bullish gap in the VIX at the opening, followed by a continuous erosion of volatility throughout the session, until any attempt at stress is neutralized.
 

Thirty-one times in a row, the same scenario, illustrating how much the market now depends on this daily administration of volatility.

Monday's session was identical to the previous thirty: the decline in the VIX was enough to keep the Nasdaq slightly up, pushing back any attempts at consolidation, despite the drop in AAPL shares.
 

Paradoxically, gold and especially silver prices react positively to this administration of volatility. The mechanism is clear. Every time the VIX is sold, the market sends an implicit signal: risk is being pushed back, not resolved. With volatility no longer allowed to play its warning role, investors seek protection outside the system, independent of options and timing. Gold captures this long-term monetary mistrust, while silver, which is narrower and more sensitive to marginal flows, reacts more explosively. Each time the VIX is compressed, convexity is destroyed on stock options, but it is recreated elsewhere, particularly on silver, which benefits both from its monetary dimension and underlying physical tensions.

In other words, as long as volatility is managed to support the indices, the implicit message is bullish for precious metals. The equity market is being kept on life support, while gold and silver interpret this as an admission of systemic fragility. That is why, session after session, every sale of the VIX translates into a surge in silver. This is not an emotional reaction, but a rational reading of a system that prefers to control risk rather than let it play out.

However, a new element has been added this week to this now well-established pattern: the rise of copper to historic highs.
 

This movement is not insignificant. Copper is also beginning to price in latent tension in supply chains, in a geopolitical context that is toughening and where physical flows are becoming more uncertain. As a metal deeply linked to industry, electrification, and infrastructure, copper reacts less to financial narratives than to real constraints. Its rise suggests that, beneath the surface of an equity market kept artificially stable by volatility, commodity markets are beginning to factor in future frictions — logistical, energy-related, or geopolitical — that indices are not yet reflecting. This is a subtle but important signal: while volatility is being managed to contain financial risk, physical risk is beginning to manifest itself elsewhere.

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