Geopolitics - wars, sanctions and commodities

Geopolitics is not background for the market. It is fuel for volatility in commodities, freight and the dollar. If you ignore the map, you will pay with spread.

This lesson teaches you how to translate geopolitical events into risk for your positions. Without forecasting wars. With a model for assessing the impact on liquidity, commodities and safe havens.

Why geopolitics is not news, but a risk structure

In 2022 most traders looked at the gas chart and said “expensive, I am shorting”. They did not understand that supply had been structurally cut off by sanctions and would not come back in 2 weeks. The losses were 5-10R.

Geopolitics changes 3 things that affect every trader:

1. Commodity supply. Oil, gas, wheat, nickel, uranium - they do not rise because of “speculation”, only because the physical goods are not leaving the port.
2. Routes and freight. The closure of the Strait of Hormuz, attacks in the Red Sea, sanctions on the fleet - they raise the cost of transport by 200-400% and delay deliveries by 2-4 weeks.
3. Legal risk and sanctions. Suddenly you cannot trade RUS50, your ruble position has a 5000 pip spread, the broker closes the instrument. This is not slippage. This is systemic risk.

That is why you need a model that turns a headline into a plan.

The 3-filter geopolitical model

When the headline “escalation of X” appears, ask 3 questions:

Filter 1: Does it affect the physical supply of a critical commodity?

If yes, then do not trade against the momentum of the commodity for the first 72h. The market rewards supply uncertainty for days, not hours.

Filter 2: Does it change the route of world trade?

Check the map:

• Strait of Hormuz - 20% of world oil. Closure = oil +30-100% within days.
• Strait of Malacca - Asia-Europe trade.
• Suez Canal / Bab al-Mandab (Red Sea) - 12% of trade. Houthi attacks = container freight x3, delays.
• Black Sea - grain.

If the route is threatened: long freight (though difficult for retail), long oil, short retail that imports from Asia (costs rise). For an FX trader: oil-importing currencies (TRY, INR, EUR if gas-dependent) weaken.

Filter 3: Does it activate safe havens and sanctions?

When escalation = Tier 1 sanctions (USA/EU on Russia, Iran, etc.):

• Flow: Capital flees the conflict region -> USD, CHF, JPY, gold, US Treasuries.
• Liquidity: Spreads on the region’s currencies rise 5-20x. Execution uncertain.
• Risk: The broker may raise margin to 100% or close the instrument.

The decision pattern:

If (Supply disrupted = YES) AND (Route disrupted = YES) → Regime: Commodity Shock. Trade only long commodity + long safe haven, never short the commodity.
If (Supply = NO) AND (Safe haven = YES) → Regime: Fear without a shortage of goods. Gold + USD + bonds long, SPX short on the retest.
If (Supply = NO, Route = NO, Safe haven = temporary) → Regime: Media noise. Fade the news after 24h, return to macro technicals.

How sanctions work on the market - the mechanics

Sanctions are divided into:

Key: Sanctions are a process, not an event. The announcement is only the start of 3-12 months of adjustment.

That is why after sanctions you do not trade the first candle. Trade the second week when the supply chain shows the first shortages.

Commodities as a thermometer of geopolitics

You do not have to trade oil to watch it. Oil is your geopolitical indicator.

• Brent >85 and rising 5% in 3 days without macro data = Geopolitics is heating up. Check the news. The risk of risk-off rises.
• TTF gas +20% a day = Europe’s problem. EURUSD will be under pressure regardless of SPX.
• Wheat +10% = a food problem, inflationary pressure, a more hawkish Fed indirectly.
• Copper falling -3% while SPX holds = the market is pricing in a slowdown in China / global industry. Early warning.

The commodity checklist before the week:

Brent D1 trend? vs 20D high/low?
TTF gas trend?
Copper vs SPX - is the correlation holding?
Gold - is it rising with oil (geopolitics) or against the USD (the Fed)?

How geopolitics enters your plan - 3 scenarios

When you have an open position and geopolitical news breaks:

Scenario 1: You have a position aligned with the safe-haven flow (long gold, long USD, short SPX)

• You can hold, but tighten the SL to BE+ and reduce to 0.5R. Geopolitics likes pullbacks after 24h when there is no escalation.

Scenario 2: You have the opposite position (long SPX, short gold)

• Immediate reduction of 50-75% without discussion. Do not average down. The risk of a weekend gap is real (Friday-Sunday). Geopolitics does not respect your technicals.

Scenario 3: You are flat and the news has just come out

• No FOMO. The first 2h is the worst moment. Wait for the 4H close and answer the 3 filters. Only then a plan.

The weekend management formula:

If (position open) AND (conflict active) AND (Friday after 18:00 CET):
→ Close 75% or hedge with an option / wide SL and accept a gap of max 1R. Never leave full risk over a geopolitical weekend.

When the plan says do not trade

1. Financial sanctions announced <24h ago on a currency you trade. Spread 500-5000 pips, no quote. This is not a market.
2. The Strait of Hormuz closed or an attack on a refinery confirmed <12h ago. Oil jumps 7% after 5% without liquidity. Your SL on oil is an illusion.
3. Your instrument is directly banned or delisted. E.g. an attempt to trade RUS50 after EU sanctions. The broker will close the position at its own price.
4. 2 contradictory geopolitical narratives at the same time. De-escalation in the morning, escalation in the evening. The market chops 2% both ways. Cash.
5. You trade a commodity you do not physically understand. Do not trade TTF gas if you do not know how spot differs from futures and what contango is. Complexity = hidden risk.

Mistakes that cost the most

Measurable exercise

Geopolitical journal - 30 days

1. Every day 1 geopolitical headline that moved commodities (min 0.5% on Brent or gold).
2. Write down:

Date | Headline | Supply filter (Y/N) | Route filter (Y/N) | Brent reaction % | XAU reaction % | SPX reaction % | Did the regime change the next day?

3. After 10 events: what % of them were noise (<24h return) and what % were a trend (>3 days)?

Goal: you will learn to tell media noise from a supply shock. 80% of headlines are noise. 20% are a shock that changes the trend for a month.

Test yourself

1. An attack on tankers in Hormuz. What do you do with your Brent short? a) I hold, because technically it looks like a short b) I close immediately, regime Supply disrupted, the short’s EV is negative for 72h c) I add

Correct: b) Supply > technicals in a shock.

2. You are long EURUSD. TTF gas +25% in a day due to an LNG terminal failure. What does this mean for EUR? a) Nothing b) Negative - Europe is a gas importer, higher energy costs = a weaker EUR indirectly c) Positive

Correct: b) Intermarket energy -> currency.

3. Why do you not leave a full position over the weekend when the conflict is active? a) Because the broker does not allow it b) Because the risk of a price gap caused by escalation is unquantifiable and there is no way to manage the SL c) Because you need to rest

Correct: b) A gap means no way to defend the position.

Frequently asked questions

Q: Should I follow geopolitical Twitter/X all day? A: No. Check twice a day: in the morning and at 17:00. Use aggregators: Reuters, Bloomberg, not anonymous accounts. Geopolitical noise on X is 90% fake in the first hours.

Q: Does geopolitics always strengthen gold? A: In 80% of cases yes, in the first impulse, but if the escalation = a strong USD and a hawkish Fed because oil = inflation, then gold can reverse after 48h. Gold loves geopolitics, but it hates rising real rates.

Q: How do I trade oil as an FX trader? A: You do not have to trade oil. Use it as a filter. Oil +5% a day = no forced long EURUSD and no forced long SPX, because inflation and risk-off can come back.

Q: Are sanctions an opportunity? A: For 99% of retail, no. For a professional commodity desk that has physical access and lawyers, yes. For you, sanctions = increased risk and spread = reduce size.

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