Global Volatility Reassessment as Washkina Era Begins, Fed Policy Uncertainty Rises

Huo Xing Finance reports: On June 22, the global market’s core focus has gradually shifted from the Middle East conflict itself to monetary policy and liquidity reassessment. Although the U.S.-Iran talks in Switzerland achieved phased progress—with both sides agreeing to establish a high-level political oversight committee and outline a 60-day roadmap toward a final agreement—the Strait of Hormuz has not yet fully resumed normal operations. Significant differences remain between Iran and the U.S. on issues concerning Lebanon and oil sanction exemptions, meaning geopolitical risks have not been fully resolved. The energy market has begun pricing in expectations of supply recovery. Libya’s crude output has risen to its highest level since 2013, Iraq plans to gradually restore production to pre-conflict levels, and Qatar has initiated preparations to restart LNG exports. Markets are now reassessing the potential impact on global energy prices and inflation trajectories following the restoration of Middle East supply chains, as the supply shock triggered by war is gradually being offset by returning supply. However, the true driver of market pricing is now the Federal Reserve’s policy shift. Interest rate markets have fully priced in a 25-basis-point rate hike in September. Goldman Sachs has simultaneously lowered its gold price target and expects no rate cuts this year. New Fed Chair Walsh continues to push for weakening forward guidance and the dot plot mechanism, significantly increasing uncertainty around the policy path. From persistently rising U.S. Treasury yields and a resilient U.S. dollar index to large-scale unwinding of global carry trades, all indicators show capital is flowing back into the dollar system. Meanwhile, following the Bank of Japan’s rate hike, while the Japanese government has signaled support for policy normalization, markets are now focusing on the scope for further tightening and the risk of yen intervention. The Japanese Ministry of Finance has publicly warned it will act against foreign exchange speculation, reflecting that major central banks globally are gradually entering a more restrictive policy environment. For the crypto market, the primary variable is no longer the Middle East situation, but rather the liquidity pressure stemming from persistently rising global funding costs. While declining energy risks may ease inflation concerns, a stronger dollar, rising U.S. Treasury yields, and escalating Fed rate hike expectations will continue to suppress risk asset valuations. When markets begin pricing in “higher rates for longer” or even “another hike,” the key focus for crypto markets will shift from geopolitical events to whether new sources of liquidity will emerge.