Oil Spike Resets the Inflation Calculus
Crude oil jumped sharply after President Trump declared the deal with Iran “over” and the U.S. launched strikes following attacks on three commercial vessels in the Strait of Hormuz. Brent crude rose above $76 a barrel for the first time in two weeks, while U.S. West Texas Intermediate climbed nearly 3% in early Wednesday trading. The U.S. Treasury Department also revoked a 60-day waiver on sanctions on Iranian oil, effective July 17. aljazeera.com reuters.com
The oil spike quickly rippled through interest rate markets. The CME FedWatch tool showed markets pricing in over 63% probability of a September rate hike, up from about 57% a day earlier, according to CNBC. Veteran strategist Ed Yardeni warned that investors are “back to square one, in some ways, back to where we were in March” on inflation. Speaking on Bloomberg Television, Yardeni said inflation concerns and the Fed are “back in play” as the Iran crisis returns. bloomberg.com cnbc.com fa-mag.com
Gold Slips, Dollar Firms Ahead of Fed Minutes
Gold fell as the stronger dollar and rising Treasury yields offset geopolitical safe-haven demand. Gold futures dropped more than 2% toward $4,050 an ounce, with the dominant market channel running through higher oil, firmer yields, and a stronger greenback rather than a clean safe-haven bid. The U.S. Dollar Index traded near 101.2, its highest level since July 2. kitco.com investopedia.com reuters.com stonex.com
Investors awaited the release of the minutes from the Federal Open Market Committee’s June 16-17 meeting — the first under new Fed Chairman Kevin Warsh. At that meeting, the Fed held rates steady at 3.50%-3.75%, but nine of 18 policymakers signaled support for rate hikes this year, a sharp pivot from March when none anticipated an increase. Warsh notably declined to submit his own rate projections and removed forward guidance from the policy statement, a departure from his predecessor Jerome Powell’s approach. chase.com pbs.org fxstreet.com cnbc.com federalreserve.gov
Rate Hike Path Takes Shape
The hawkish repricing comes atop an already shifting consensus. Bank of America and Deutsche Bank both forecast September rate hikes in late June, with BofA projecting three increases totaling 75 basis points before year-end. Core inflation, as measured by the Fed’s preferred gauge, stood at 3.4% year-over-year as of May — well above the 2% target. reuters.com yardeniquicktakes.com
With the next FOMC meeting set for July 28-29 and oil prices threatening to restoke price pressures, the path of monetary policy under Warsh’s leadership remains a central question for markets heading into the second half of the year. chase.com
