Iran's Hormuz Tanker Strikes Keep Oil Above $100 as Fed Minutes Loom

The Strait of Hormuz is the narrow waterway through which roughly a fifth of the world's seaborne oil passes, so any military escalation there raises the risk that tanker traffic — and the crude it carries — could be disrupted. That risk premium, rather than actual supply losses, is what has kept Brent elevated even as physical oil flows have improved, ING noted. The brief dip below $100 a barrel shows how quickly prices can swing on headlines from the region, while the recovery reflects how reluctant traders are to price out the threat entirely.

That oil backdrop matters because it feeds directly into the two macro stories driving markets this week. Stubborn energy costs keep inflation pressure alive, which limits how much bonds can rally and, by extension, how far the dollar can fall. ING's view is that energy prices should remain a drag on any meaningful recovery in bonds and, by extension, on a decline in the dollar. With few signs of an imminent deal to reduce the disruption risk, that channel stays active.

Attention now turns to the release of the September FOMC minutes. Markets are still looking for greater clarity on the data-policy reaction function — essentially, which inflation outcomes would justify another rate hike this year. The minutes may also reveal the extent of any dovish dissent within the committee. But the scope for a dovish surprise appears limited: the dot plot shows more members expecting two further hikes this year than no further tightening, and markets continue to firmly price a December move.

The data since the September hike has been softish, which sets a relatively high bar for a positive dollar reaction to the minutes. ING expects some stabilisation around the 102.0 area in the DXY, but sees risks remaining on the upside. In practical terms, the combination of firm oil and a Fed still signalling tightening potential keeps the dollar supported and caps the bond market's relief rallies, unless Hormuz tensions ease or the minutes deliver an unexpectedly dovish signal.