Fed Hikes Odds, Oil Prices Plunge on Iran Tensions

Concerns about inflation and interest rates have taken center stage in financial markets. According to The New York Times, Federal Reserve Chairman Waller is considering reducing the number of Federal Open Market Committee (FOMC) meetings from eight times a year, which could lower transparency and provide short-term support for the dollar.

The market is pricing in a 73.6% chance of a 25 basis point interest rate hike in September, up from 26.4% just last week. The probability of a 50 basis point hike in October stands at 17.9%. Waller's comments have increased uncertainty about the Fed's policy path.

On the international front, tensions between the US and Iran may be easing. Trump stated that he canceled strikes against Iran due to requests from Saudi Arabia, the UAE, Qatar, and Iran. He also mentioned that there is already an agreement in the Strait of Hormuz, with negotiations set to begin tomorrow.

Meanwhile, OPEC+ agreed to increase the September oil production quota by 188,000 barrels per day. The easing of geopolitical tensions has led to a decline in oil prices, with WTI crude falling nearly 5% and Brent crude down around 3%.