Global Markets Stuck in Limbo as Middle East Conflict Drags On
The conflict in the Middle East remains stuck in a state of strategic limbo, with President Trump indicating that he is taking a lower-key approach to the situation. This shift in strategy comes as oil prices remain high in the upper $80s, and the Strait of Hormuz remains mostly closed.
Meanwhile, softer US data has reduced rate hike expectations for the rest of 2026, with less than one full hike priced into the swaps curve for December. Further progress on inflation could seal the view that there won't be a tightening of policy.
The Japanese yen has given back nearly half of what it gained as a result of joint US Treasury and Japan Ministry of Finance intervention two weeks ago. The Bank of Japan is expected to raise interest rates for any gains in the yen to be sustained, which would justify domestic fundamentals.