• Oil has climbed back above $100 a barrel as Mid-East conflict escalation reignites inflation concerns

• Risk aversion lifts the USD and implied volatility, but gains in the latter appear tepid given the risks to FX

• That's because there is still a lack of actual/realised volatility upon which FX options thrive

• Benchmark 1-month EUR/USD implied volatility is 5.25, not much above recent and 2026 lows at 4.9

• However - 1-month daily realised volatility - often used as a fair value measure - is just 3.85

• In short - If EUR/USD spot repeats last month's performance - implied vol holders would lose money

• Related - FX options wrap - Oil, yields and Fed reignite FX volatility risk
EURUSD FX implied vs realised vol


(Richard Pace is a Reuters market analyst. The views expressed are his own)