A Reuters Open Interest newsletter

The destructive power of $100 oil

By Jamie McGeever, Markets Columnist 

Global stocks fell on Thursday, slammed by a 10% spike in oil prices, spiking bond yields and a stronger dollar, all of which point to a deteriorating outlook for consumers, businesses and economic growth. 

In my column today I argue that, although the "Trump always chickens out" strategy of buying beaten-down stocks on the assumption that the U.S. President backs down from his more extreme policies, the Middle East war may be a "TACO" too far. 

I’d love to hear from you, so please reach out to me with comments at jamie.mcgeever@thomsonreuters.com. You can also follow me at @ReutersJamie and @reutersjamie.bsky.social. 

Data refreshes every time you open this email. For more U.S. market news, click here. Please send any feedback to morningbid@thomsonreuters.com.

* 2026 Fed rate cut bets evaporate

And just like that, it was gone. Not so long ago - i.e, only a few weeks ago, before the U.S.-Israeli attacks on Iran - many analysts were predicting three interest rate cuts from the Fed this year. As of Thursday, not even one U.S. rate cut in 2026 is fully priced in at all. 

Traders have made it clear where they think the stagflation risks lie with oil at $100 a barrel, and the 'transitory' lessons of 2021-22 are weighing heavily too. No rate hikes are priced in yet though, and next week would be far too soon. Right? Let's see what tomorrow's PCE inflation figures hold. 

* Global bond rout

Zoom right out the curve, and geographically, and inflation fears really are intensifying, as the accelerating global bond market selloff shows. Investors are fleeing fixed income everywhere. 

On Thursday the two-year U.S. yield hit its highest since August, and the 2s/10s curve flattened the most since April; Germany's 10-year yield is near 3% and the highest since October 2023, and UK yields are up 60 bps in two weeks. 

* Central bank bonanza

Central bankers are in an unenviable position, and could be forgiven for just wanting to close their eyes, sit on their hands and wish the unfolding crisis away. But many of them are under the spotlight next week in what will be one of the busiest weeks of central bank meetings in a long time. 

Here's a rundown of who's meeting next week: the central banks of Australia, Canada, Brazil, Japan, Sweden, Switzerland, the euro zone, the UK and, of course, the Fed. The most likely to hike rates is the RBA, then possibly the BOJ, with the rest on hold. But if oil's at, say, $120 or higher, you never know.

The "Trump always chickens out" investment strategy - buying beaten-down stocks on the assumption that the U.S. president will ultimately back down from his more extreme policies - has, for the most part, been a profitable one. But the Iran war may change that.

Shuttered oil production and refining capacity, bombed-out infrastructure, and the upending of global energy flows cannot be made right at the stroke of a pen – or a Truth Social post. 

Similarly, the unprecedented surge in the cost of shipping out of the Middle East and insuring vessels in the region is unlikely to return to "normal" levels any time soon, even after hostilities officially end. 

And this is the first time ever that the Strait of Hormuz – the vital waterway through which 20% of the world's daily energy use passes – has effectively been closed. 

It will take months, possibly years, to get everything back to its pre-war state.