Rising oil prices completely overturn bets on the 2026 Federal Reserve interest rate cuts in the US bond market.

Due to the oil-driven inflation shock caused by the Iran war, bond traders' bets on the Fed cutting rates have been in vain, and they are currently desperate to find new strategies. With major central banks issuing warnings about inflation, short-term bond yields are surging, and traders are completely abandoning their expectations for further monetary policy easing by the Fed in 2026. By Friday, as global benchmark oil prices remained at their highest levels since 2022, market sentiment underwent a drastic change, with traders even believing that there is a fifty percent chance the Fed will raise rates before October. "As long as the war is in escalation mode rather than de-escalation mode, market concerns about inflation will outweigh concerns about economic growth, given the situations during recent supply shocks, this mentality is rational," said John Briggs, head of US rate strategy at French bank Natixis. He added, "Now is a good time to step aside and reassess after the dust settles."