What's Happening
The US and Iran exchanged direct military strikes for the first time in a month, with tanker traffic through the Strait of Hormuz severely disrupted. Oil prices jumped 3% to above $90 per barrel, while mortgage rates surged to their highest level since June 2025 as energy costs ripple through financial markets.
Market Impact
Energy stocks and inflation-sensitive sectors benefit from the oil spike, but bond markets face headwinds as rate expectations shift. Mortgage refinancing activity will contract sharply, pressuring housing-related equities. Crude volatility now dominates near-term equity direction.
Broader Implications
Renewed Middle East escalation undermines the Fed's inflation narrative and complicates rate-cut expectations. Supply-chain disruptions through Hormuz could persist if tensions remain elevated, creating stagflationary risk into Q4.