(Bloomberg) — The bout of oil volatility seen in early August quickly reversed, with the $75 per barrel price level once again proving to be a sticking point for the Brent market.

The brief spike came as volatility in stocks and other markets suddenly increased. The broader sell-off in risk assets came amid concerns that the Federal Reserve waited too long to cut interest rates, causing the economy to overcorrect and limiting oil demand.

Now, with the conflict between Israel and Hezbollah intensifying, stocks rising as the Fed signals it is ready to cut interest rates, and the physical oil market showing signs of a near-term supply shortage, Brent prices are climbing back into the mid-$75-$90 range where they have mostly remained since November. Unless there is a sharp escalation in the Middle East, these factors will put pressure on options values, which tend to rise when futures threaten to fall below that range.

Brent and West Texas Intermediate crude oils both rose about 0.5 percent in early Asian trading on Monday.

Whether volatility remains low may also depend on whether OPEC+ countries follow their tentative plan to reverse some of their output cuts in the coming months. If they increase production, inventories could build up in the fourth quarter, according to Trafigura Group. This would likely weigh on prices and potentially boost demand for option protection.

Implied volatility in second-month contracts fell to its lowest level since July 29 on Friday, a sharp reversal from a six-month high reached a few weeks earlier. Meanwhile, put skewness rose to its highest level since December late Friday.

The skew has widened in favor of put options, suggesting investors see less risk of rising oil prices, said Tanvir Sandhu, chief derivatives strategist at Bloomberg Intelligence. Concerns about stagnant demand growth are being offset by geopolitical risks. That could lead to less price volatility, as seen before August, when volatility hit multi-year lows.

There are some signs of a near-term supply shortage. US inventories have fallen by nearly 35 million barrels over the past two months. The biggest increase in open options contracts last week came from November calls above $80 to $100.

“Oil is running out faster than many people thought and there are bottlenecks in the market,” said Scott Shelton, energy specialist at TP ICAP Group Plc.

– With support from Devika Krishna Kumar.

(Updated with early Monday trading in fourth paragraph)

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