Inflation Expectations Surge Amid War-Driven Oil Price Spike

Traders now expect an over 80% chance of a Federal Reserve interest rate hike by September, according to CME's FedWatch tool. This is up from just 53% last week, driven by rising inflation expectations and higher global oil prices.

The price of Brent crude has surged past $98 a barrel this week, with some brief dips below $100 on Thursday. Rising energy costs have a ripple effect throughout the economy, increasing transportation, manufacturing, and shipping costs that eventually translate to more expensive goods for consumers.

Meanwhile, the European Central Bank kept interest rates unchanged at 2.25% last Thursday, as widely expected by economists and investors. However, policymakers remain cautious about renewed disruptions to global energy markets, which could keep inflation above their target of 2% longer than anticipated.