A potential peace agreement between the United States and Iran has shifted investors’ attention back to central bank policies and inflation. Global bond markets gained while oil prices continued to decline, as traders awaited the US Federal Reserve’s latest policy decision for signals on the future direction of interest rates.
Brent crude dropped below $79 per barrel, marking its lowest level in more than three months. The benchmark has fallen about 15% over the past four trading sessions, fueled by expectations that a US-Iran agreement could reopen the Strait of Hormuz, increase global oil supplies, and help ease inflationary pressures. The changing market outlook has already prompted some oil tankers to reroute toward the Middle East in anticipation of renewed shipping through the strategic waterway.
The decline in energy prices has led investors to reassess expectations for global monetary policy. While the Bank of Japan is still expected to raise interest rates, most major central banks—including the Federal Reserve—are widely anticipated to leave borrowing costs unchanged this week.
Market participants are now closely watching the Federal Reserve’s first meeting under Chair Kevin Warsh. Analysts at Bloomberg Economics expect changes in the Fed’s communication strategy, noting that Warsh may break with recent tradition by not publishing his own interest-rate projection in the closely watched “dot plot.”
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