While the tense situation in the Iran war would have shocked the stock markets in the past, the VIX, which is considered a barometer of fear, is currently surprisingly calm.
• VIX mostly signals normal market nervousness despite the Iran war
• Historically, such periods of calm are often followed by a period of increased volatility
• Will the big stock market shock come in the summer?
The volatility index VIX, the so-called “fear barometer” of the US stock markets, recently closed at 18.80 points (as of June 8, 2026). Despite the extremely tense situation in the Iran war, the index is still in the historical average range and far away from levels that are typically associated with serious market upheavals or panic. However, it is precisely this contradiction that could be a serious warning signal.
What the VIX says
The VIX measures the expected range of the S&P 500 over the next 30 days based on the prices of options on the broad US index. Since options are often used to hedge stock portfolios, the risk perception of market participants can be derived from their price development. If demand for hedges increases, options become more expensive and the VIX rises. This is often the case in an uncertain market environment where fear and anxiety are rising in the markets. However, in phases of high investor confidence, the demand for protection falls and the volatility index falls. The VIX has therefore been considered a reliable indicator of fear and uncertainty in the financial markets for decades. There is often a negative correlation between the VIX and the S&P 500: When the S&P 500 rises, the VIX falls and vice versa.
Fear barometer largely in normal range despite ongoing Iran war
The Iran War began on February 28, 2026 with attacks by Israel and the United States on Iranian targets. In the days that followed, the markets reacted nervously, as expected: The volatility index VIX rose and reached 35.30 points on March 9, the previous high since the beginning of the conflict, which is also its current 52-week high. Since then, however, the nervousness has decreased significantly.
Only last Friday, June 5th, did the VIX rise above the important 20 point mark for the first time since April 23rd – with a huge and abrupt jump of 39.68 percent to 21.51 points. However, the trigger for this increase was probably not the developments in the conflict with Iran, but rather surprisingly strong data from the US labor market, which fueled fears of interest rate increases. This is also supported by the fact that the VIX fell below the 20-point threshold again at the beginning of the new week – even though there were new rocket attacks between Israel and Iran over the weekend.
In March, i.e. the first weeks of the Iran war, the index was consistently above the threshold of 20 points, before in recent weeks it was well below the levels that are typically associated with real market worries and in some cases even approached the area below 15 points, in which market strategists speak of pronounced optimism, but which can quickly turn into dangerous complacency on the part of investors. At its current level, the VIX is in the range of the historical average, which is between 15 and 20 points and signals a neutral market environment in which investors expect moderate market movements.
The contrast between the current level of the VIX and the tense geopolitical situation remains striking. Historically, military conflicts or the risk of supply chain disruptions often led to significantly higher demand for hedging transactions. For example, during the Corona crisis in 2020, the VIX temporarily climbed above the threshold of 80 points. However, the current conflict seems to be perceived as a relatively manageable risk.
Investors between normality and complacency
A closer look at the classification of the different VIX ranges makes the situation clearer: Values below 15 points are generally considered a sign of exceptional calm and high investor confidence. The VIX is in the long-term average range between 15 and 20 points. Market participants expect moderate fluctuations and a largely orderly market environment in this zone. Only above 20 points does nervousness increase significantly and the unrest on the market is considered increased. However, only values of more than 25 points mark the transition to a regime of high volatility – and only from a value of more than 30 points are extreme and rapid fluctuations on the stock exchanges generally assumed. Values above this threshold are therefore often associated with uncertainty, crises or fear.
Against this background, a VIX of 18.80 points seems almost astonishingly low – although not as strong as in the previous weeks, when it was increasingly approaching the threshold of 15 points. However, investors still seem to believe that the war in Iran will remain regionally limited and will have no lasting impact on the US economy or corporate profits. The ongoing blockage of the Strait of Hormuz, with its corresponding consequences for the availability and price of crude oil, could potentially have serious economic consequences.
But the majority of investors behave as if the geopolitical source of the fire was far away. Several US indices such as the S&P 500, Dow Jones and NASDAQ Composite recently even achieved new all-time highs. Instead of concerns about war, other well-known topics such as AI or robust corporate balance sheets continue to dominate. It seems as if the markets have developed remarkable resilience to crises in recent years. The corona pandemic, the war in Ukraine and concerns about inflation were ultimately always replaced by new highs on the stock markets. Many investors have apparently learned – and with good reason – to view geopolitical risks as just short-term noise and therefore see little reason for comprehensive hedging measures.
In addition, the current market structure also suggests muted volatility. Systematic investment strategies, extensive share buybacks by companies and the high liquidity of institutional investors have a stabilizing effect.
Will the situation soon become a major danger?
But the question is not if volatility will return, just when. Phases of low volatility are inevitably always followed by periods of larger market movements. The current average level of the VIX could create a false sense of security: if investors underestimate risks, hedging is reduced and positions are expanded. This makes markets more vulnerable to unexpected shocks. Stock market history is rich in examples of this where investors ignored risks for a long period of time before an unexpected trigger caused volatility to suddenly return. The market is also currently likely to be vulnerable to a correction as soon as expectations are clearly disappointed.
The situation could become particularly critical with a view to the upcoming summer months, which are traditionally considered a phase of lower liquidity. Many institutional market participants are less active and trading volumes are falling, making exchanges more vulnerable to larger price swings. Even minor surprises could trigger disproportionate reactions.
What investors should consider now
The current situation creates an unusual area of tension for investors. On the one hand, the current level of the VIX does not suggest panic. The US economy appears robust, many companies continue to deliver solid business figures and the stock markets are near their highs. On the other hand, the low volatility also suggests that many risks are currently only being priced in to a limited extent and there is little room for negative surprises. The lower the perceived danger, the greater the reaction can be when reality overtakes expectations.
It is particularly useful in such market phases for investors to critically examine their own risk position. Anyone who has benefited from rising prices in recent months could consider securing individual profits or aligning the portfolio weighting more closely with long-term investment goals. Potential stress factors, which have apparently received little attention on the stock markets to date, deserve particular attention. These include, among other things, a possible expansion of the Middle East conflict, another significant rise in energy prices or surprisingly high inflation data. Any of these developments could quickly end the current low volatility of the markets.
However, there is little reason for long-term investors to withdraw completely from the market. Historically, geopolitical crises have almost always been temporary burdens on stock markets. Rather, the decisive factor is to maintain sufficient liquidity reserves and to diversify the portfolio broadly in order to be able to react flexibly to possible market upheavals.
However, the current calm should not be taken as an all-clear. Rather, it could be an opportunity to review your own hedging strategies and possibly purchase hedging instruments such as put options – as long as these are still comparatively cheap due to the low expected volatility indicated by the VIX.
Carolin Ludwig, editorial team at finanzen.net
This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims for recourse.