Markets Abruptly Price in Fed Rate Hike as Oil Surges on Geopolitical Risk

Global financial markets executed a stunning reversal in late March, shifting from expectations of multiple Federal Reserve rate cuts to pricing in the possibility of a rate hike in 2026. This pivot was driven by a sharp escalation in Middle East geopolitical tensions that propelled oil prices above $100 per barrel, fueling fears of a significant resurgence in inflation. The shift has sent shockwaves across asset classes, with equities retreating and Treasury yields climbing, forcing investors to rapidly reassess the monetary policy outlook.