Middle East Tensions Flag Stock Market Risk-Off Mode, and a Perfect 0DTE Option Trade Sets Up for Friday

The sudden Israeli airstrikes on Iran have shaken global financial markets. WTI crude surged over 8%, spot gold reclaimed $3,420 per ounce, and Nasdaq 100 futures dropped 1.5%, marking the sharpest single-day loss since late May. While the initial shock triggered a spike in risk aversion, it may also be setting up a short-term dip-buying opportunity—particularly through an aggressive 0DTE options strategy, supported by historical lessons and current market sentiment.

It’s easy to argue that rising Middle East tensions could derail the market, as conflict naturally increases volatility and demand for safe havens. Still, from a structural standpoint, U.S. equities may prove far more insulated than many expect. Most American companies have limited exposure to either Iran or Israel, both geographically and in terms of earnings impact. Israel’s footprint in the U.S. economy is relatively small, while Iran remains heavily sanctioned and disconnected from global trade.

The Russia-Ukraine war provides a powerful precedent. When Russia launched its invasion in February 2022, markets saw an immediate and violent reaction. On February 24, the S&P 500 opened down 2.5% but closed up 1.56%. Gold jumped 3.3% intraday but reversed into a small loss by the close. These moves reflect initial panic followed by rational repricing—exactly the kind of behavior seen during geopolitical shocks.

Recent market action also hints at underlying strength. On Thursday, the S&P 500 tested the 6,000 level again, up 25% from the April low and just 2% shy of an all-time high. Bullish momentum remains strong. In the last four trading sessions, the index posted three “open-low, close-high” patterns, a classic signal of dip-buying strength. Both bulls and bears are looking for a catalyst—bulls to reinforce their positions, bears to unwind into weakness. With the market already hovering near key resistance and lacking a blockbuster catalyst from U.S.–China trade headlines, the Israel-Iran conflict may serve as the flashpoint.

Some investors may use this event as justification to trigger a pullback, but once the emotion fades, dip-buying may return quickly. A V-shaped recovery intraday is well within reason, especially given the strength of recent buying on weakness.

For more aggressive traders, 0DTE calls offer a tactical high-risk, high-reward setup. With Friday being expiration day and volatility already elevated, the potential for sharp intraday moves increases. But traders must proceed with caution. 0DTE options are unforgiving. A wrong directional bet, poorly chosen strike, or delayed execution can erase the premium instantly. Traders should be prepared to lock profits quickly and strictly manage downside risk. It’s essential to approach these trades knowing the entire premium can be lost.

Here’s how I may approach Friday’s session:

If the market gaps down at the open, driven by overnight headlines, I would consider initiating at-the-money QQQ calls expiring the same day. Retail traders often step in early during fear-driven opens, which can spark a brief bounce within the first 30 to 60 minutes. That early spike is typically the first opportunity to take partial profits, as opening volatility tends to be the most extreme.

Profits at 20% to 50% levels should be harvested quickly, with any remaining portion left to ride if momentum persists. Keep in mind that as the session moves forward, theta decay accelerates and time premium erodes. Early gains can vanish quickly if buyers lose conviction or early traders exit en masse. This often produces a sharp rise-fall sequence in the first hour of trading. If bullish momentum remains, that dip may present a secondary entry for those tracking intraday price action.

Focus on intraday higher lows and higher highs, which signal sustained upside pressure. But no matter how strong the trend looks, profits should be locked in aggressively. In 0DTE trading, greed often turns gains into losses within minutes.

Why use QQQ? It tracks the broader tech sector while reducing single-stock risk. Nvidia may benefit from Middle East GPU demand, while other tech names like Broadcom are more insulated. QQQ offers a cleaner macro bet without tying the trade to unpredictable company headlines.

In short-term trading, market gaps lower can create opportunity—but weekend risk remains. There’s a real possibility of retaliation from Iran, and holding positions overnight into such uncertainty could be dangerous. That’s why a day-trade strategy with tight profit-taking is a smart approach. For those with conviction, a small remaining position could be carried cautiously, but the emphasis must remain on discipline and risk control.