Two forces are driving markets right now: a Middle East energy shock and a sharp repricing of global rate-hike expectations.
Published research this week is broadly aligned on the trigger. Houthi attacks on Saudi tankers, renewed US-Iran hostilities, and threats to close the Strait of Hormuz have pushed Brent crude to $100–$102/bbl. Analysts across the board flag this as the dominant near-term macro driver. The knock-on: US 10-year yields have hit 2026 highs above 4.7%, and markets now price roughly 35–40% odds of a Fed hike at the July 28–29 meeting, with September viewed as near-certain. Several research notes highlight that Chair Warsh's move away from forward guidance is amplifying front-end volatility.
Views diverge on what the Fed should do. One camp argues the oil shock is transitory and the Fed should hold through 2026. A contrarian thread sees up to three hikes over the next year. On oil itself, some models point to further monthly upside if disruptions persist, while others expect diplomatic resolution to cap prices.
Key catalysts ahead: the FOMC decision, US Q2 GDP and core PCE, and Big Tech earnings.