LONDON (Reuters) -Big investors are preparing for the normally thinly-traded months ahead with even more caution than usual as risks of oil price volatility or fresh tariff shocks could shake up the complacent market mood and spark a repeat of last August's rout.

Scarred by the sell-off a year ago, when global growth fears hit low volume markets to drive big swings in asset prices worldwide, investors see stocks, bonds and currencies vulnerable against the backdrop of a fragile Israel-Iran ceasefire, seesawing oil prices and trade-war uncertainty.

Asset managers said they were raising portfolio protections given the geopolitical risks and uncertainty about China and Europe striking U.S. trade deals as a July 9 deadline looms.

"Our positioning is that over the (next) three-month horizon markets will not get the positive confirmations they are pricing in," said HSBC Asset Management Global Chief Investment Officer Xavier Baraton.

Baraton is buying equity put options as an insurance, which pay out if stocks fall.

Goldman Sachs' ( GS ) asset management chiefs, recommended in a presentation last week, loading up on protection against sell-off scenarios with volatility, interest rate and market-trend strategies.

CRUEL SUMMER

As the July 9 deadline for a U.S.-EU tariff deal approaches, with scant progress so far towards mutually-agreed baseline levies, concern is growing over how long markets will stay numb to trade risks.

"If we continue to get this kind of blasé approach to that risk, then it becomes more tempting to be looking for protection over that (July) event," Chris Jeffery, head of multi-asset strategy at Britain's biggest investor LGIM, told Reuters.

World stocks, up 7% so far this year, this week touched fresh record highs.

And Wall Street's fear gauge of expected volatility on the S&P 500 index is muted at below 18, down from 52 in April.

Still, one-month VIX futures, which cover July 9, are around a 1.5 point premium over the VIX, in a pattern that can signal investors expect market sentiment to sour.

HSBC's ( HSBC ) Baraton said Trump's unpredictability remains a broad market risk.

"Markets seem to have forgotten everything that the Trump administration has been threatening to do," he said.

Republican leaders are pushing to get what Trump calls his One Big Beautiful Bill Act through Congress and to his desk before the July 4 Independence Day holiday. The bill would add trillions to the $36.2 trillion national debt.

OK COMPUTER

Markets can trade calmly for longer than appears rational in part because of a circular relationship between the VIX and risky asset prices linked to how automated trading funds are programmed to behave.

Automated volatility control funds, which according to UBS run about $700 billion of assets, often buy stocks when the VIX drops and dump them when it surges. This has been cited as a reason behind last August's brief but sharp selloff.

Royal London Asset Management multi-asset head Trevor Greetham said computer programs the group uses to limit clients' exposure to market swings were picking up trading cues driving them to buy equities.

But fund managers overseeing RLAM's volatility control robots had decided not to follow them in recent weeks and sold some stocks to manage portfolio risk instead, he said.

Goldman asset management partner Simon Dangoor warned, meanwhile, that oil shocks could boost the dollar and upend a consensus it is on a weakening trend.

"If we did have a very big disruption in oil markets, that's exactly the kind of shock that could see the dollar higher into a risk-off environment," Dangoor said in last week's presentation.

For sure, while Middle East tensions have eased in recent days, risks from the region and especially potential disruptions to the Strait of Hormuz shipping route remain in focus.

Oil has swung between $81 and $63 a barrel in June, making it one of the most volatile months for crude in 15 years. An index of expected oil price shifts is around its highest since September 2022.

UBS European equity strategy head Gerry Fowler said options pricing suggested derivatives traders were betting on a higher frequency of single-day stock market volatility surges, such as last August. This, he warned, may not be the ideal time for vacations.

"Given that everybody knows this summer is full of catalysts, there's going to be far fewer people on holiday this year," he said.