Daily Summary - Escalation in the Middle East and FOMC Fears Inflation
Date: 8 July 2026
Geopolitical Developments
President Donald Trump announced the end of the ceasefire with Iran during the NATO summit in Ankara, labeling the previous agreement a "waste of time" and accusing Iranian authorities of dishonesty. In response to Iranian strikes on commercial vessels in the Strait of Hormuz, U.S. forces executed a significant retaliatory strike on over 80 Iranian targets, including air defenses.
Iran's actions were deemed a violation of a temporary memorandum that had ensured safe passage for ships in exchange for the suspension of U.S. sanctions and the initiation of nuclear talks. The Iranian attack involved at least three commercial vessels, including an LNG tanker. Following the U.S. retaliation, Iran launched further strikes targeting locations in Bahrain and Kuwait.
In light of these developments, Washington reinstated full sanctions on Iranian oil trade and Trump indicated a potential resumption of the port blockade, raising market fears of a full-scale war. Despite this, Trump suggested that he does not foresee a complete war, which contributed to volatility in the oil market.
Market Reactions
Oil Market
Oil prices surged, with Brent oil testing the $80 per barrel mark and WTI rising to $75 per barrel. The oil forward curve shifted into deep backwardation, indicating a significant price change at the short end of the curve. Despite a rise in crude oil inventories by 3 million barrels, there was a notable drop in petroleum product inventories, with U.S. strategic reserves falling below 320 million barrels.
Stock Market
Global equity markets experienced significant declines as investors fled risk. The US500 index fell by 0.4%, while the tech-heavy US100 index nearly recovered its losses due to positive news regarding China's AI companies. European markets also saw declines, with major indices losing between 1.5% and 2% for the second consecutive session. However, companies related to memory technology, such as SanDisk and Applied Materials, showed signs of recovery.
Chinese company Alibaba rebounded by 10% amid expectations of stronger financial results and investor interest in AI-related stocks.
Macroeconomic Indicators
The resurgence of geopolitical threats has heightened global inflation risks due to potential disruptions in energy supply chains. Money markets are increasingly pricing in a hawkish scenario, with a significant rise in the probability of the Federal Reserve raising interest rates in October. The FOMC minutes indicated that inflation concerns are substantial, with many Fed members advocating for adjustments to monetary policy if inflation escalates.
Despite geopolitical risks, the EUR/USD pair rebounded, testing local highs around 1.1430, while USD/JPY continued to gain, approaching 162.5.
Cryptocurrency Market
The digital asset market faced strong selling pressure as investors retreated from risk. Bitcoin (BTC) fell by 1.8% to $62,200, while Ethereum (ETH) dropped by 1.7% to $1,736.
Conclusion
The combination of escalating tensions in the Middle East and the Federal Reserve's hawkish stance on inflation has created a volatile market environment, impacting commodities, equities, and cryptocurrencies.