The market backdrop currently looks constructive: SpaceX’s debut has been a success, sucking up capital and attention without derailing broader markets. At the same time, the path to an Iran agreement looks clearer, with the ceasefire extended and the Strait of Hormuz moving towards a reopening. Moreover, the oil price has dropped back below USD 85 a barrel, easing a burden that had weighed heavily on Europe and Asia in particular. Naturally, this leaves investors asking what the next worry might be.

The obvious candidate is central banks – though perhaps not quite yet. This week is all about policy, with most of the big hitters providing reports. Central banks first come to mind, then exuberant investor sentiment, which may become an issue later on. This week, however, belongs to the masters of money. We expect another hike at the ECB, while the BoJ hiked rates to 1% on 16 June, with considerable focus now on the new Fed chair.

The Fed has taken centre stage – not because of suspense about interest rates, but since this Wednesday marked the first press conference delivered by the new Fed Chair Kevin Warsh. As anticipated, he delivered on expectations for reduced forward guidance. 

Central banks in focus

In the US, with half of the Committee pencilling in hikes later this year and the updated projections showing higher inflation through 2028, we shouldn’t be surprised to see front-end yield up 16bp, the most in a single day in more than one year. Importantly, further out the curve, moves remain more contained. Ultimately, with the reopening of the Strait of Hormuz reducing inflation pressure and broader measures of the labour market pointing to a more mixed picture than implied by recent Non-Farm Payroll reports, we think the Fed will ultimately avoid delivering hikes.

Meanwhile, the ECB expects core inflation to remain elevated in 2027, another rate hike at the forthcoming July meeting has become highly likely, and we have adjusted our forecast accordingly. In contrast to the Fed, and more in line with the ECB, the Bank of Japan is adopting a cautious approach to rate hikes, adjusting its policy to a more neutral stance. This takes into account the upside risks to inflation from energy price surges, as well as the cyclical growth tailwinds from the artificial intelligence infrastructure boom and expansionary fiscal policy. The BoJ raised its benchmark rate by 25bps to 1% on 16 June, the highest in three decades due to upside inflation risks from energy prices.

Brighter outlook for trade amid Iran conflict

After weeks of back and forth, the US and Iran seem to have found common ground to end the war. This brightens the outlook for a normalisation of trade around the Strait of Hormuz, and energy prices are under pressure accordingly. While various questions remain open, energy markets seem to be heading for the ‘new-old’ set-up, where oversupply dominates.

As of 19 June, the US-Iran memorandum of understanding (MoU) is regarded as coming into effect, opening the door to 60 days of negotiations and easing the most immediate fear of a renewed Gulf disruption. Oil reacted accordingly: the geopolitical premium faded, prices softened from recent highs, and markets took comfort from the notion that diplomacy, however fragile, has again replaced escalation as the central scenario.

The main points are the ceasefire confirmation, safe shipping through the Strait of Hormuz, and sanctions relief for Iran. This diplomatic path will likely face setbacks, but our view that trade around the Strait of Hormuz will stabilise appears to be holding true. This normalisation builds on increased pragmatism and opportunism alongside diplomatic success.

The Iran war stays on track to follow the known pattern: geopolitics only provides short-lived price shocks. Looking ahead, the resumption of energy exports should be swift, because most fields and export facilities remained partially operational throughout the conflict. Importantly, in the case of oil, with the alternative supply routes likely in full use for longer, it only needs a partial restoration of Hormuz trade to close the supply gap.

We see a swift return of the new-old market order with likely even harsher oversupply dynamics. There are, of course, many open questions, especially about Iran’s future, but the main message of 2026 shapes up to be a comforting one, with markets once again having proven their resilience. We stick to our Cautious view on oil.

What investors should keep in mind

For now, investor sentiment still leaves room for more upside. This matters because leadership inside the artificial intelligence (AI) boom has not really changed. Hardware remains in charge, software continues to lag, and the Magnificent 7 are staying put rather than running away again. In this sense, the old playbook still applies.

We have upgraded gold and silver to Bullish from a technical analysis standpoint and highlight the ongoing relief for European and Asian markets due to falling energy prices. The summer games are here, both in markets and beyond, and investors should enjoy them while they last.

There will be time enough later to worry about whether policy becomes too restrictive for exuberant investor sentiment. For now, the environment still argues for staying with the winners of the AI buildout while keeping one eye on central banks and the other on technicals.