Focus back on Iran

Summer holidays are in full swing and certain areas of markets are less active. But the volatile nature of events in the Gulf region is keeping rates traders fully focused.

• Brent Crude has rallied for five consecutive sessions (as of 11 August), climbing from $78 back above $90 for the first time in a fortnight. Expectations for rate hikes were waning off the back of US data last week, but the resurgent oil price has now negated that. The ECB is 91% expected to hike rates in September, while the Bank of England and the Fed have full hikes priced for Q4. Second hikes are then priced in for Q1 by the ECB and Q2 by the BoE, with the Fed currently priced at 94% likelihood in early Q3.
• US Non-farm payrolls showed a surprising drop of 23,000 jobs. Also, the prior two months’ numbers were revised lower, which suggests the labour market is weaker than previously thought after the strong numbers earlier this year. Wage inflation also surprisingly fell, from 3.4% to 3.2%, prompting the market to lower its implied likelihood of rate hikes at upcoming meetings.
• The Reserve Bank of Australia kept rates on hold as expected with a unanimous decision. The accompanying comments said that the economy was slowing as expected, but inflation remains too high. With higher oil and related commodity prices linked to the Middle East conflict adding pressure, the current risks remain to the upside. The market doesn't have a full hike priced in for Australia, but one is more likely than not from November.
• UK retail sales rose slower than expected in the year to July, up 1% compared to forecasts of 1.5%, despite England's World Cup run and the prolonged heatwave, although pub transactions were up 10%.

Source: Bloomberg; pricing as per 11 August 2026

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