VIX, the “Fear Gauge” rises again: 2026 at the peak of geopolitical tension

The year has opened with a renewed rise in volatility across financial markets. The VIX, the index that measures the implied volatility of options on the S&P 500 and is therefore known as the “Fear Gauge,” has shown a steady increase since the beginning of 2026, repeatedly climbing above the 20-point threshold. While still far from the peaks reached during major crises, this level signals a growing climate of uncertainty among investors.

In the first weeks of the year, the index has fluctuated between the 18–22 range, with several spikes above 22 during moments of heightened tension. The move has not been linear: sudden flare-ups have been followed by equally swift pullbacks, a sign of a market that is sensitive to news but not yet gripped by panic. The 20-point threshold represents a symbolic dividing line: below this level, conditions suggest relative stability; above it, markets enter a territory of widespread caution.

The main trigger appears to be the geopolitical escalation in the Middle East. Tensions between Israel and Iran, along with fears of a broader conflict, have once again brought global energy risk into focus. Concerns surrounding the Strait of Hormuz, a crucial chokepoint for oil transit, have fueled the rise in crude prices, bringing inflation risks and the potential implications for U.S. monetary policy back into the spotlight.

Each new geopolitical development has sparked a rush for hedging: investors have increased their purchases of options to protect equity portfolios, pushing implied volatility - and consequently the VIX - higher. At the same time, flows into traditionally defensive assets such as gold and government bonds have strengthened, while equity indices have shown greater fragility.

It is worth emphasizing, however, that current levels remain far from the systemic alarm thresholds seen in the past, when the VIX surged above 40 or even 60. Today, the market is pricing in elevated risk, but not a catastrophic scenario. This is a phase of controlled nervousness, where volatility reflects uncertainty more than panic.

Beyond geopolitics, expectations surrounding the Federal Reserve’s next moves, macroeconomic data, and the earnings season also weigh on sentiment. The VIX is the result of all these variables, but in the early months of 2026 the common thread remains international instability. The thermometer shows a fever - but for now, not an emergency.

Andrea Pelucchi