Middle East Conflict and Fed Fears Spark Global Market Volatility

A recent escalation in Middle East conflicts has sent oil prices surging, breaking out of a three-day sell-off. The crisis has also deeply impacted European natural gas markets, with energy prices expected to remain elevated due to supply disruptions and heatwaves.

The Federal Reserve's upcoming interest rate decision is another key factor driving market anxiety. While a policy hold is the base case, investors are pricing in a 30-35% probability of a surprise 25-basis-point rate hike, fueled by fears that surging oil prices and sticky inflation will force policymakers to act.

Meanwhile, central banks across major economies navigate distinct domestic challenges, with the Bank of England expected to deliver a hawkish hold at 3.75%, while the Bank of Japan maintains its gradual tightening bias following its move to 1.00%.