As worries about populism in Europe rise, investors bet on stock market volatility

Traders work at the stock exchange in Frankfurt am Main, western Germany, on March 20, 2019. (AFP / Daniel Roland)
Updated 22 March 2019
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As worries about populism in Europe rise, investors bet on stock market volatility

  • More than 350 million EU citizens will head to the polls between May 23 and 26 to elect a new Parliament
  • The vote will shape the future of the bloc amid a backlash against immigration and years of austerity

LONDON: Investors are betting on heightened political uncertainty and greater volatility in European stock markets ahead of European Parliament elections in May amid growing concerns about rising populism.
In one of the first concrete signs in financial markets that investors are bracing for political instability, VSTOXX futures , which reflect investor sentiment and economic uncertainty, have jumped in recent weeks.
While the classic gauge of fear — known as implied volatility, which tracks demand for options in European stocks — is currently at 15.68, futures that bet on the same thing over the coming months show a pronounced jump.
That’s because investors have piled on trades that bet on big swings in stocks as election day nears.
Implied volatility for futures contracts expiring in May show a pronounced jump to 16.8, compared with 15.35 in April. The contracts measure the 30-day implied volatility of the euro zone STOXX 50 index.
“We are seeing a bit of a kink around May when we have European elections and we have this wave of populism,” said Edmund Shing, head of equities and derivatives strategy at BNP Paribas.

Looming elections
More than 350 million EU citizens will head to the polls between May 23 and 26 to elect a new Parliament, a vote that will shape the future of the bloc amid a backlash against immigration and years of austerity.
Mainstream center-left and center-right lawmakers may lose control of the legislature for the first time, as euroskeptic and far-right candidates build support.
Herve Guyon, Societe Generale’s head of European equity derivatives flow strategy and solutions, said the rise of populism had triggered a recent flurry of speculative trades.
“Political uncertainty might be coming from the EU rather than the United States. We’ve seen investors doing very large trades to benefit from an increase in volatility around these events,” he said.
“We as a bank don’t expect the elections to be a massive game-changer. The populists won’t get enough to disrupt the political system, but we do note some investors did take some positions on this event.”
The implied volatility is still well below levels seen in late 2018 when global stock markets were routed amid worries about rising interest rates, slowing economic growth and the trade war between Beijing and Washington.
In late December, it shot to above 26, its highest since February.
But the flurry of activity suggests investors are seeking out new opportunities after a slide in implied volatility across major asset classes.
Edward Park, deputy chief investment officer at asset manager Brooks MacDonald, said some of the activity may also be due to persistent uncertainty about Britain’s exit from the European Union as the Brexit date of March 29 nears.
This year, volatility across currency, fixed income and stocks markets has plunged as the US Federal Reserve and European Central Bank have taken dovish policy stances.
The Deutsche Bank currency volatility indicator hit multi-year lows this week, while the proxy for fixed income volatility is languishing at all-time lows.
In stocks, the Cboe volatility index, Wall Street’s so-called “fear gauge,” fell to its weakest in six months this week.
“There’s been a cross-asset volatility crash — in euro-dollar, US rates and equities — in the aftermath of (ECB President Mario) Draghi’s and (Fed Chairman Jerome) Powell’s comments and the expectation of lower rates for longer,” said Guyon.


Red Sea’s oxygen balance under strain, experts warn

Updated 13 February 2026
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Red Sea’s oxygen balance under strain, experts warn

  • Scientists say warming waters, nutrient runoff and coastal development could quietly erode coral resilience

RIYADH: The Red Sea may not have dead zones, but its fragile ecosystem is vulnerable to oxygen depletion — a quiet decline that can undermine coral health and disrupt marine life.

Sea dead zones are hypoxic or low-oxygen pockets that form most often when nutrient pollution — especially nitrogen and phosphorus from farm runoff and wastewater — fuels blooms that ultimately strip oxygen from the water.

Experts say the risk is not inevitable, but it depends on earlier detection and tighter control of the conditions that drain oxygen from coastal waters.

A sea that relies on its own “breathing” is also a sea shaped by geography.

FASTFACT

DID YOU KNOW?

  • The Red Sea is naturally low in oxygen because of its warm waters and high salinity — making it especially vulnerable to further oxygen decline.
  • The Red Sea’s narrow Bab Al-Mandab strait limits deepwater exchange, meaning the basin largely depends on its own internal circulation to ‘replenish’ oxygen.
  • Saudi Arabia’s coastline features steep underwater drop-offs, allowing deep, oxygen-poor water to move closer to coral reefs near shore.

Matheus Paiva, a senior oceanographer, told Arab News that “the Red Sea’s shallow Bab Al-Mandab choke point limits deepwater exchange,” meaning oxygen replenishment depends heavily on internal overturning circulation.

He said this circulation is driven as surface waters flow north, cool, become denser and sink, helping ventilate deeper layers through vertical mixing.

Paiva said the Saudi coastline’s underwater topography makes the risk more immediate close to shore.

Coral reefs along Saudi Arabia’s Red Sea coast, where scientists say warm, salty waters and limited deep-water exchange can leave ecosystems vulnerable to low-oxygen stress. (Unsplash.com)

“Unlike regions with wide, gradual shelves, our coast features narrow fringing reefs that drop sharply into deep water via steep underwater cliffs and canyons,” he said.

“This ‘step-and-drop’ topography brings deep oxygen-poor water close to shore.”

Paiva said warming at the surface can intensify stratification and reduce vertical mixing. He said that can allow low-oxygen water to creep upslope and affect shallower reef zones.

How oxygen gets consumed faster than it’s replaced is where human pressure can tip the balance.

Carlos Duarte, executive director or the Coral Research and Development Accelerator Program at KAUST, told Arab News that the Red Sea’s baseline conditions create vulnerability. “Because of its warm waters and high salinity, the Red Sea is inherently low in oxygen and, therefore, vulnerable to processes that decline oxygen further.”

He said algal blooms and heat waves raise biological oxygen demand, linking low oxygen to coral mortality.

Duarte said human-driven nutrient and organic inputs can intensify these declines.

He said poorly managed urban development and aquaculture operations can contribute nutrient and organic loads that fuel algal blooms.

Coral reefs along Saudi Arabia’s Red Sea coast, where scientists say warm, salty waters and limited deep-water exchange can leave ecosystems vulnerable to low-oxygen stress. (Unsplash.com)

Duarte said that as bloom material decomposes, it strips oxygen from the water and can lead to hypoxia.

The Red Sea’s celebrated clarity reflects a naturally nutrient-poor system. “The risk is amplified because the Red Sea is naturally oligotrophic. It is nutrient-poor and crystal clear,” Paiva said.

He added that wastewater releases and heavy rain events that trigger flash floods can push large nutrient loads into coastal waters in a short time.

In turn, those pulses can threaten biodiversity and the marine environment that underpins tourism investments along the Kingdom’s Red Sea coast.

Seeing low oxygen coming — rather than reacting after the fact — is the promise of new monitoring and analytics.

Paiva said high-accuracy oxygen data still relies on direct measurements collected during vessel surveys.

Carlos Duarte, executive director or the Coral Research and Development Accelerator Program at KAUST.

“We still depend heavily on classic vessel surveys,” he said. Teams deploy multiparameter sondes to profile the water column and collect water samples to establish a baseline.

“This ‘water-truthing’ remains the industry standard for high-accuracy data,” he said.

Saeed Al-Zahrani, general manager for Saudi Arabia at NetApp, said continuous data can help teams intervene earlier. “Oxygen depletion is rarely sudden; it tends to build over time when conditions line up,” he said.

Al-Zahrani said AI can flag anomalies, learn what “normal” looks like in specific locations, and generate short-horizon risk forecasts.

He added that it creates a decision window — guidance on when to increase sampling, where to focus response efforts, and when to tighten controls around discharges.

Coastal development that reduces oxygen risk starts, Duarte said, with what never reaches the sea.

Duarte said Saudi Arabia’s west coast investments have an advantage compared with older coastal destinations: the opportunity to design sustainability into projects from the outset rather than trying to retrofit after degradation becomes evident.

Duarte said nutrient control is a direct lever to reduce oxygen-depletion risk. “Achieve circular economies where organic products and nutrients are recycled and reused in the system to avoid discharging nutrients to the marine environment,” he said.

Al-Zahrani said wastewater and environmental systems produce huge volumes of information, but fragmentation can slow decisions.

He said connecting data in near real time can help detect problems earlier and anticipate load spikes tied to rainfall, tourism peaks, or industrial activity.

Reef resilience depends on reducing stress before heat and low oxygen overlap.

Duarte told Arab News: “Coral reefs are extremely vulnerable to oxygen depletion.” He added that it can contribute to bleaching and mortality in a warmer ocean.

He said marine heat waves can worsen oxygen stress by reducing oxygen solubility and limiting ventilation of subsurface waters, while increasing oxygen demands of organisms.

Duarte said reducing nutrient inputs and managing reefs to avoid excessive growth of seaweed can build resistance.

He also said models that account for how waves and currents interact with reef topography — work he said is being developed at KAUST — can help guide restoration toward sites more likely to remain oxygenated during heat stress.