Global markets tense up as a ninth night of US strikes on Iran chokes the Strait of Hormuz, sending Brent to $90.97 and reviving Fed inflation fears.
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The fragile détente in the Middle East is broken. After an interim memorandum of understanding briefly reopened the Strait of Hormuz, the US has launched a ninth consecutive night of attacks, and Iran has suspended its commitments under the deal. The immediate consequence is a physical and psychological shock to energy markets: Brent crude punched through $90 a barrel, and LNG tankers in the strait have come under direct attack.
This supply shock instantly redrew the global rate path. A surge in the Bloomberg dollar index—driven by a collapsing probability of near-term Fed easing—is the clearest signal that the market has flipped from a growth narrative to an inflation-fear narrative. With the Fed firmly on hold and an implied probability of an 85.6% chance of no move at the July meeting, the dollar’s strength is tightening financial conditions everywhere.
