Investing.com -- The temporary ceasefire between the U.S. and Iran, announced last week, triggered a sharp reassessment in oil markets, with options data suggesting investors quickly dialed back, but did not eliminate, geopolitical risk premiums.

According to OptionMetrics, “risk appetite snapped back across asset classes” following the April 8 announcement, underscoring how fragile the conflict-driven pricing had been.

Garrett DeSimone, Head Quant at OptionMetrics, said crude options had already been signaling skepticism about sustained disruption.

Even at the height of tensions, “most of the probability mass in the risk-neutral distribution sat well below the forward price,” indicating traders saw lower prices as the most likely outcome.

OptionMetrics analysis is said to show that on April 7, the risk-neutral densities were “wide and flat,” with the most likely outcome significantly below prevailing futures levels.

This suggested that elevated prices were being driven by “a relatively low-probability but high-impact right tail” tied to escalation risks.

Following the ceasefire, the distribution tightened sharply. Peak probability rose nearly 40% higher, while “probability mass migrated out of both tails and back into the body of the distribution,” reflecting growing confidence in a de-escalation scenario.

The likelihood of a sharp downside move was also said to have diminished, with the left tail “falling to near zero.”

However, risks remain. OptionMetrics highlighted a persistent “plateau in the right tail,” indicating markets still price in a range of escalation outcomes.

DeSimone stated: “We define the implied probability of conflict escalation from the current ceasefire as the probability of Brent crude settling more than 5% above the forward price — the region of the density beyond the inflection point where the RND transitions from smooth decay into a persistent plateau. As of April 8, this probability stands at approximately 15-20%.”