Falling oil prices have triggered a complete reversal in Federal Reserve interest-rate expectations among US bond traders. West Texas Intermediate crude has settled between $80 and $84 per barrel, a significant retreat from levels above $100 seen earlier in 2026. This shift has eliminated all expectations for any rate hikes for the remainder of 2026, sending US Treasury yields tumbling by as much as 9 basis points. The Fed’s target rate remains at 3.50% to 3.75%, with 30-year yields dropping roughly 8 basis points. This reversal follows a period of geopolitical tensions in the Middle East, including conflicts involving Iran and disruptions near the Strait of Hormuz, which had pushed oil above $100 per barrel.
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