US EditionIran war escalation wakes markets up to risks of deeper economic pain
A 40% surge in oil prices due to Iran conflict prompts investors to reconsider Federal Reserve rate cuts amid rising inflation and policy uncertainty.
- On Wednesday, the Federal Reserve held interest rates steady for the second consecutive meeting while forecasting higher inflation this year, as Fed Chair Jerome Powell cited the surge in oil prices stemming from the conflict in Iran.
- Oil prices jumped to $119 a barrel on Thursday as Iran attacked energy facilities following Israel's strike on the South Pars gas field, marking the biggest escalation of the conflict yet.
- Britain's two-year yields jumped over 30 basis points while U.S. short-dated bond yields climbed about 10 basis points, reflecting broad surges in government bond yields from Britain to the United States.
- Traders now price in two Bank of England rate hikes by year-end, while markets see a roughly 60% chance of a European Central Bank rate hike in April, reflecting divergence from Fed policy.
- Analysts warn the supply shock could "morph into a demand shock," potentially causing a painful broader market washout as the conflict muddies the Federal Reserve's path regarding above-target inflation.
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Iran war escalation wakes markets up to risks of deeper economic pain
Investors reassessing the potential for deeper economic pain from the war in Iran are selling assets across the globe, from government bonds to stocks and gold, reigniting fears that markets may become vulnerable to a bigger dislocation.
Investors face cloudier Fed rate view as Iran war grips markets
Investors are facing a cloudier view of U.S. monetary policy in the coming months, with a war in the Middle East muddying the outlook for a Federal Reserve that already was grappling with above-target inflation and an uneven labor market.
Doug Casey Warns Iran War Could Spiral Into Prolonged Crisis, Reshape Markets and Global Power
Veteran investor Doug Casey says the escalating Iran conflict poses a deeper political threat than financial turmoil, with far-reaching consequences for markets, oil, and global stability. Markets Face Deeper Risks From Geopolitics Than Economics, Casey Says Doug Casey, author of Crisis Investing, told The David Lin Report this week that the current geopolitical environment is […]
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