A growing disconnect is emerging between market expectations and central bank signals as oil prices climb above $111 amid the Iran conflict. Traders have rapidly shifted their outlook, wiping out all expectations of rate cuts in 2026 and even pricing in potential rate hikes—despite no clear guidance from policymakers supporting that move.

Meanwhile, the Federal Reserve has taken a more cautious stance, indicating a “wait-and-see” approach as it evaluates whether the inflation impact from rising energy prices will be temporary. This divergence highlights increasing uncertainty, with markets reacting aggressively while central banks remain more measured in their outlook.