Rising U.S.-Iran tensions are creating dislocations in the options market, strategists say, providing opportunities for investors who know where to look.

Take oil, which behaved “relatively well” after a U.S. airstrike killed a top Iranian general last week, according to Credit Suisse Group AG derivatives strategist Mandy Xu. WTI crude’s one-month implied volatility rose just two points to 26.5%, its bottom quartile over the past year, she wrote in a note on Monday.

That compares with a 14-point jump to 46% in September, when drones attacked Saudi Arabian oil fields.

But there was a big move elsewhere: the United States Oil Fund LP. USO saw one-month bullish options rapidly become more expensive versus bearish ones. To take advantage, Xu recommends buying the USO February $14/$15 call spread given escalating geopolitical tensions. The exchange-traded fund was $13.12 at 11:09 a.m. in New York.

On the surface, U.S. stocks took the friction more or less in stride. The S&P 500 Index fell 0.7% on Friday, only to claw back 0.4% in the next session. The Cboe Volatility Index, or VIX, also climbed on Friday but hasn’t closed above 15 for almost a month, remaining well below its lifetime average of about 19. Volatility traders appear to have been prepared for a setback in equities, helping keep VIX gains in check.

But underneath, traders were busy bidding up the cost of protection in what Xu identifies as “significant dislocations.” S&P 500 skew, the price of bearish puts versus bullish calls, reached its highest level since February 2018.

With skew elevated but implied volatility modest, UBS Group AG strategist Stuart Kaiser recommends a stock replacement strategy -- using options for directional bets instead of owning shares outright -- to reduce risk, according to a Sunday note.

At the same time, not all volatility indicators are flashing bearish signals for stocks. Todd Salamone, senior vice president of research at Schaeffer’s Investment Research, notes that the VIX has been on a trend of lower highs since the middle of last year -- and the past week’s ceilings just above 16 are consistent with that.

“There is room for a VIX decline to the 12 area, that would likely be coincident with new highs, as equities continue to plow ahead despite a visible and obvious VIX floor in place for several months,” Salamone wrote. “Stay the short-term bullish course until this pattern is broken.”