Persian Gulf Ban Sends Shockwaves Through Financial Markets
A recent ban on US and Israeli ships entering the Persian Gulf has sent shockwaves through financial markets, causing a jump in US Treasury yields.
The Oman-Iran deal, which prohibits civilian and military vessels from entering the region, has driven up crude prices by over 2.85%, with West Texas Intermediate (WTI) trading at around $76.45 per barrel.
This increase in oil prices has reignited inflation concerns, causing market participants to price in a possible jump in inflation, which would warrant a rate hike by the Federal Reserve (Fed).
The odds of a 25 basis points (bps) rate hike at the September meeting stand near 58%, while there's a 42% chance for keeping rates at the current 3.50%-3.75% range.
San Francisco Fed President Mary Daly has expressed her support for maintaining monetary policy unchanged, citing the need for additional data before making a decision.