A Barrel Above ? at the Heart of Caution

Brent rises 1.54% to ?.10 and WTI 1.63% to ?.53. The conflict between the United States and Iran has lasted eight months, and a tanker caught fire after hitting mines in the Strait of Hormuz, a strategic passage for hydrocarbons. For central banks, such a level of energy prices complicates the fight against inflation.

Central Banks Under Pressure

The Fed raised rates in September and should leave them unchanged this week. At Indosuez Wealth Management, Lucas Meric considers another hike likely in December, or even in March, depending on inflation data. Christophe Boucher, of ABN Amro Investment Solutions, anticipates two additional hikes within six months, then a long pause, with possible cuts in late 2027 or early 2028.

In the eurozone, the ECB should keep its policy rate at 2.5%. Martin Wolburg, of Generali Investments, considers inflation in line with projections and sees no second-round effect. He stresses, however, that markets will monitor the recent widening of the spread between the OAT and the Bund.

Rates and Sentiment: A Tense Climate but No Panic

The yield on ten-year AAA eurozone bonds stood at 3.37% on October 26, and the long-term component of the curve (Beta0) at 1.69. On the investor side, the CNN Fear & Greed index moved from 27.95 on October 26 to 31.00 on October 27: a real improvement, but one that leaves the indicator at the bottom of its 0-to-100 scale. Equities reflect this restraint: the CAC 40 sheds 0.17% to 7,874.10 points at mid-session, London 0.27%, Frankfurt 0.02% and Amsterdam 0.56%.

The mechanism is clear. High crude oil feeds the risk of persistent inflation, which sustains a restrictive bias among central banks. Sustained long-term rates then weigh on the valuation of risk assets. Investors prefer to wait for monetary policy messages before taking on more risk.

What Nuances the Picture

Several elements temper this reading. Worldline (+10.77%) and Stellantis (+5.71%) post strong gains after their quarterly results. The rebound in sentiment, even modest, indicates that tension is not worsening. Lisa Shalett, of Morgan Stanley Wealth Management, also sees an AI investment cycle still supportive for technology earnings.

Above all, this file contains no inflation figures or OECD data, the corresponding request having failed. The link between oil and inflation therefore remains an economic argument, not a measurement. Likewise, the concomitance between rates, sentiment and energy prices does not demonstrate causality.

Caution to Be Confirmed

The available data describe a wait-and-see market, subject to the dual pressure of energy and restrictive monetary policy, with no sign of acute stress. The decisions of the Fed on Wednesday evening, the ECB on Thursday and the Bank of Japan on Friday, as well as the evolution of crude oil, will tell whether this caution dissipates or takes hold.

This article was written with the assistance of artificial intelligence and verified by our editorial team.