Oil Price Collapse Complicates Fed Decision Amid Diverging Markets

The recent spike in Brent crude oil prices has vanished overnight, complicating the Federal Reserve's decision on July 29. The price of Brent oil plummeted by 9.2% to $87.86 after President Trump paused Iran strikes, easing inflation pressure that had pushed the 10-year Treasury yield to 4.71%, its highest since 2024.

The Fed now faces a dilemma: hold rates and risk another oil-driven inflation surge or raise them as tech and crypto already show strain. The sharp reversal in markets has also affected mortgage rates, which may stabilize if the drop in oil prices holds. However, bonds aren't rallying, with yields remaining elevated at 4.63%, and the VIX at 17.58 signaling caution rather than relief.

Equities are diverging sharply, with tech stocks suffering as high-beta sectors face higher financing costs. The Nasdaq dropped 1.15% last Friday, led by semiconductor stocks, Intel (-7.9%), ARM (-8.1%), and Marvell (-7.2%), which extended their monthly declines. In contrast, telecoms and industrials surged, with Verizon (+5.8%) and Schlumberger (+11%) leading the market.