Fog of War Clouds Rate Cut Outlook

The ongoing conflict in the Middle East, particularly the disruption of oil shipping routes, is significantly reducing the likelihood of interest rate cuts by global central banks in 2026. Rising oil prices and concerns about a repeat of the 2022 energy shock are prompting a more cautious approach from institutions worldwide, including the Fed, ECB, and BoE. This uncertainty is leading to a shift in market expectations, with investors anticipating tighter monetary policy and a potential reversal of previously anticipated rate cuts.

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