A severe escalation in the US-Iran conflict effectively shuttered the Strait of Hormuz this week, prompting the United Arab Emirates to historically quit OPEC and sending Brent crude surging past $126 a barrel. President Donald Trump’s strict naval blockade and stalled peace talks have fueled a massive energy shock, pitting war-driven stagflation against the deflationary momentum of the global AI boom.
The Federal Reserve held its benchmark interest rate steady at 3.5% to 3.75%, but the decision revealed a deepening internal division with an unprecedented four-way dissent from policymakers who opposed an easing bias. Adding to the institutional drama, Chair Jerome Powell announced he will remain at the central bank as a governor after his term ends next month, drawing sharp criticism as his designated successor, Kevin Warsh, cleared a key Senate committee vote.
US equities capped their best quarter in six years, driven by insatiable demand for artificial intelligence equipment that propelled the S&P 500 and chipmakers to historic highs. Meanwhile, global currency traders are on high alert as the Japanese yen plummeted to its weakest level against the dollar since 1986, intensifying the pressure on Japanese authorities to intervene in the market.
The volatile ceasefire between the US and Iran dominated global markets, with early-week tit-for-tat military strikes in the Strait of Hormuz giving way to a renewed truce and indirect peace talks in Qatar. The safe passage of commercial shipping lanes prompted a massive unwinding of the war-driven energy shock, driving global oil prices sharply lower and prompting Citigroup to forecast crude could slump to $60 a barrel by year-end.