Market Insights June 22, 2026

Oil: between political easing and fundamental reality

Despite a particularly tense atmosphere and persistent distrust, the United States and Iran have recently announced a preliminary agreement aimed at bringing an end to the conflict in the Middle East and paving the way for a gradual normalization of their relations. This development, although fragile, has had an immediate impact on energy markets. Oil prices have declined markedly, as investors factor in a reduced risk of supply disruptions and diminished concerns over a rapid depletion of inventories. This movement primarily reflects a fading of fears rather than a fundamental shift in market equilibrium.

Indeed, despite this easing, several factors lead us to question the durability of the downward trend. Inventory levels remain below seasonal averages, while many countries, shaken by the recent prospect of shortages, are likely to rebuild their reserves. This dynamic should support demand in the coming months. In this context, even if a further decline in prices would benefit consumers, a level of around USD 80 per barrel currently appears to be a realistic and sustainable equilibrium for all market participants.

A new Fed, a stronger dollar?

Last week’s Federal Reserve meeting likely marks an important turning point in the conduct of US monetary policy. While the status quo on interest rates was widely anticipated by markets, it was above all the shift in tone and approach that caught investors’ attention. At his first meeting as Fed Chair, Kevin Warsh clearly sought to leave his imprint and break with his predecessor’s communication strategy.

In particular, the new Chair opted for a more concise message, significantly reducing forward guidance provided to the market. This intention to limit the “guidance” of expectations represents a meaningful change. Beyond the form, the substance of the message also appears more hawkish. The priority given to price stability was forcefully reaffirmed, even as US inflation remains noticeably above the 2% target.

This shift is all the more notable given that the committee members’ projections now show a greater openness to the possibility of further monetary tightening. Whereas only a few months ago markets were focused on the timing of the next rate cuts, several Fed officials are now considering the possibility of a hike should inflationary pressures persist.

Admittedly, the recent peace agreement between the United States and Iran has led to a significant decline in oil prices, which could help ease inflationary pressures in the coming months. However, Kevin Warsh appears determined not to view this energy-driven relief as a sufficient guarantee. Should core inflation remain resilient despite lower energy costs, the Fed could be compelled to adopt an even more restrictive stance in order to preserve its credibility.

Foreign exchange markets have already taken note of this shift. The US dollar strengthened following the meeting, supported by the prospect of a more rigorous monetary policy and a potentially more favourable interest rate differential compared with other major developed economies. In both the short and medium term, the US currency could therefore continue to benefit from this new orientation. The combination of a more vigilant Fed in the face of inflation, less accommodative communication, and an increased likelihood of tightening provides meaningful support for the dollar, whose appreciation potential may not yet be fully exhausted.

This week’s figure: 1%

The Bank of Japan has raised its policy rate by 25 basis points to 1%, marking its highest level since 1995, thereby continuing its monetary policy normalization. This decision reflects inflationary pressures that are now more broadly spread across the economy.