Global Markets Buckle Under Iran-US Tensions and Tariff Uncertainty

The August 2026 Outlook is marked by turmoil in the financial markets. The Iran ceasefire frayed and ultimately collapsed, triggering US retaliation and escalating tensions. This volatility has sent shockwaves through global markets, causing the DXY to whipsaw from 101.5 to around 100.

Central banks struggled to gain attention amidst the turmoil, with the BoJ and BoE holding rates unchanged at 1.0% and 0.75%, respectively. The ECB also left rates unchanged, but barely registered on the radar.

The US dollar's performance was particularly notable, with Section 301 tariffs set to hit supply chains just as Middle East tensions keep markets on edge. The Federal Reserve's July meeting delivered a hold, but three dissents pushed for a hike, keeping a September move alive.

New York Fed President John Williams suggested the next move could be lower in an interview on August 3, citing cooling inflation and disinflationary forces. This is a departure from the hawkish tone markets have been pricing off the silence of Fed Chair Kevin Warsh.