Malaysian plane crash stirs volatility

News of Malaysian Air 17's crash in Eastern Ukraine sent a ripple effect through the markets. European and Russian market reactions were most violent, but markets in the U.S. were likewise impacted.

While we only have rumors as to what may have caused the disaster, we are fairly certain that the odds of a Boeing 777 just falling out of the sky are extremely small. This is why Boeing bounced so quickly from $126.76 back into positive territory.

Some other reactions were even more telling as to investor reaction to the disaster:

Crude-oil futures traded down to $102 a barrel, and managed only a gain of 75 cents to $102.75 a barrel.

The volatility metric for the S&P 500 (VIX) was going through a rotation as the July contract expired Wednesday around 11.06 and traders/investors were rolling into the August contracts proceeding that expiration. The VIX opened today at 11.35, and was barely holding 11 when the MH 17 news began to break on Twitter. The reaction spiked the VIX back to 11.40 before it made a steady climb to the high of the day (12.86). That was just as Fast Money Halftime Report came on air (12:00 pm ET) and began covering the story of the crash. The VIX bled off a bit, falling to 12.40 over the following hour.

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The VIX futures however barely budged. At 1:42 pm ET, those futures looked like this: August 12.93 +.23, September 13.70 +.10, October 14.48 +.08.

My professional read of the futures reaction is that the market is saying this is a short-term event. If market believed this would result in a serious escalation of conflict in Eastern Ukraine, then we'd see September and August VIX futures moving higher instead of unchanged.

Read MoreUkraine air space still open but airlines avoid it

Gold futures moved higher immediately, but the move was muted. Gold was trading at $1,305 an ounce and did hit $1,325.90, but sold off $8 from that high to $1,317.90.

It is noteworthy that we saw a significant bump higher in three defense names; Lockheed Martin, Northrop Grumman and Raytheon. All three were down about 0.5 percent, but flipped to positive immediately on the news of MH 17 crash.

"Fast Money" trader Jon Najarian is a professional investor, money manager, media analyst and co-founder of optionMONSTER and tradeMONSTER. He worked as a floor trader for 25 years and before that, he was a linebacker for the Chicago Bears. Follow him on Twitter @optionmonster.

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