CFD Brokers and Prop Firms Raise Margins Amid Middle East Volatility

CFD brokers and proprietary trading firms have taken precautionary measures as markets face heightened volatility due to escalating turmoil in the Middle East. On Monday, many firms moved to increase margin requirements and limit leverage to safeguard against sudden market swings.

Brokers and Prop Firms Actively Increase Margins

Several contracts-for-differences (CFD) brokers and prop firms have issued notifications to traders about higher margin requirements and reduced leverage starting Monday’s trading session.

Australian broker TMGM, which has a significant presence in China, has temporarily raised minimum margin levels for withdrawals and internal transfers from 200% to 500%. Prop firm The5ers has also reduced leverage on oil, metals, and indices to 1:5, down from its usual offerings of 1:33 on oil and metals and 1:25 on indices.

Regional Tensions Spill Over Globally

The strike by the US and Israel on Iran, followed by Iran’s retaliation against US bases in the region, has triggered widespread market uncertainty. Concerns over a potential Iranian blockade of the Strait of Hormuz, through which roughly one-fifth of global seaborne oil trade passes, have heightened fears of a sudden supply disruption in the oil market.

Asian markets reacted immediately on Monday morning, with Brent crude rising about 5% and US crude gaining roughly 4% per barrel. Metals also climbed, with gold up approximately 1% at the start of the trading week.

At the same time, regional stock markets opened sharply lower. Japan’s Nikkei dropped 1.4%, while MSCI’s Asia-Pacific index outside Japan fell 1.2%. Dow and S&P 500 futures were down by around one percentage point.

Protecting Against Increased Volatility

CFD brokers and prop firms, particularly those heavily exposed to B-book models, are raising margin requirements to mitigate risk. Many were still recovering from earlier volatility in gold, which caused significant gaps in their P&L, narrowly avoided by a one-day price drop in the metal.

As the trading day progresses, more CFD brokers and prop firms are expected to implement higher margin requirements, especially ahead of the US market open.