Global markets drop as Fed signals hikes, oil surges on Iran strike

Federal Reserve Chair Kevin Warsh reinforced expectations of an imminent US interest rate hike on Monday with hawkish remarks delivered at the Jackson Hole Economic Symposium, triggering broad-based losses across global equity markets as investors simultaneously digested news of a US military strike on Iran's Larak Island that sent oil prices sharply higher.

Fed Chair signals September tightening

Speaking at the annual gathering of central bankers in Wyoming, Warsh indicated that further policy tightening could prove necessary if inflation persists above the central bank's target, even as he characterized the American labor market as consistent with full employment. Chicago Fed President Austan Goolsbee endorsed this assessment, telling reporters that price stability remains the paramount challenge facing policymakers. Money markets immediately repriced the probability of a Fed hike in September to approximately 60%, pushing the two-year Treasury yield up 12 basis points to 4.33% and the benchmark 10-year yield to 4.71%.

Oil surges after US strike on Iran

Geopolitical risk premiums spiked after US forces targeted Larak Island, with Iranian media reporting civilian casualties from the missile strikes and traders abandoning expectations that Washington would rely solely on economic sanctions rather than military action. Brent crude for December delivery jumped 5.6% to reach $90.95 per barrel, while safe-haven flows initially lifted the dollar index to 99.7 — its highest level since mid-August — before the greenback settled at 99.6. US President Donald Trump separately announced that Washington had secured the "biggest oil deal in world history" with Venezuela, claiming control over more than 65 billion barrels of reserves, while the US Treasury's Financial Crimes Enforcement Network proposed cutting the Emirati branch of Egypt's Banque Misr from correspondent banking access as part of the "Operation Economic Outcast" initiative.

Equities decline across major bourses

US equities closed lower on Friday after the University of Michigan revised its August consumer sentiment index upward to 51.7, with the Dow Jones Industrial Average slipping 0.02%, the S&P 500 falling 0.25% and the Nasdaq declining 0.52% before indexes opened the new week in negative territory. European bourses had found support late last week from robust corporate earnings, though the ECB's latest meeting minutes hinted at possible tightening next month and the euro weakened 0.6% against the dollar to 1.1582 on Friday. Asian markets faced additional pressure from disappointing Chinese manufacturing data, with investors now turning attention to US nonfarm payroll figures due this week for further monetary policy cues, while Japan's Nikkei 225 fell 0.9% and the yen touched 160.2 against the dollar — its weakest since July 31.