No hope for rate cuts? Soaring oil prices may push global inflation to 4.5% in Q4

Geopolitics is driving oil prices to new highs, and this energy shock—triggered by the Iran war—is systematically reshaping global inflation and monetary policy expectations. According to Ziad Daoud, Bloomberg’s Chief Emerging Markets Economist, geopolitical supply disruptions since the start of the year have pushed oil prices up by $49—roughly half of current oil prices. Bloomberg forecasts that surging oil prices will push global inflation to 4.5% in Q4 2026—well above 3.1% in Q4 2025. Meanwhile, market expectations for the U.S. Federal Reserve have shifted from rate cuts to rate hikes: current market pricing suggests the Fed may not only hold rates steady but could even raise them nearly twice.

Reuters’ latest article summary, September 17, 2026

1. Rising oil prices, interest rates, and bond yields are brewing a stagflation cocktail for markets. Reuters analysis notes that the Middle East conflict has pushed up energy prices while global government bond yields rise, sparking growing market concern over a ‘high-inflation + low-growth’ stagflation scenario. Although equity markets remain near record highs—and AI investment continues to support the economy—rising bond yields, energy costs, and financing expenses are gradually transmitting risks into equity and credit markets. 2. Tech stocks lead Wall Street higher as oil prices ease and Treasury yields dip. U.S. equities rebounded sharply today. Easing oil prices, falling U.S. Treasury yields, and still-solid labor data helped markets digest the Fed’s first rate hike in three years. Technology stocks led the gains, with the Nasdaq performing especially strongly. 3. Goldman Sachs’ October hike call underscores renewed Fed tightening risks. Goldman Sachs has reversed its earlier view and now expects the Fed to raise rates by 25 basis points in October. The Fed raised its target rate yesterday to 3.75%–4.00%, and officials’ projections indicate further hikes remain possible this year. 4. U.S. labor market remains on solid footing; rising mortgage rates pressure housing sector. Initial U.S. jobless claims unexpectedly fell to 196,000, signaling continued labor market strength. However, Reuters cautions that Labor Day-related seasonal adjustments may have exaggerated the decline. Robust employment also gives the Fed more room to keep focusing squarely on inflation. 5. U.S. rate options signal markets can absorb higher Treasury yields. The U.S. 10-year Treasury yield has risen to around 5%, yet the options market shows no panic comparable to prior episodes when yields hit 5%. Reuters analysis suggests investors currently appear more willing to accept a ‘higher-for-longer’ interest-rate environment. 6. Bank of England shifts tone toward rate hikes as inflation set to top 4%. The Bank of England held its benchmark rate steady at 3.75%, but adopted a markedly more hawkish tone. It forecasts UK inflation may exceed 4% again early next year; if energy prices continue rising, further rate hikes cannot be ruled out. 7. Shell-led LNG Canada could approve Phase 2 expansion by early October, sources say.

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