Weekly Market Update: Fed Rate Hike Risk, Rising Oil Prices and ASX Outlook (16 June 2026)

“Life is pleasant. Death is peaceful. It’s the transition that’s troublesome.”

- Isaac Asimov

Cartoon of the Week

Stocks (ASX 200 ↓0.08%, S&P 500 ↑0.39%, NASDAQ (↑0.45%)

Bond Yields (ACGB3Y 4.56%, ↑8 bps / ACGB10Y 4.91%, ↑8 bps)

Bond Curves (A$ 3s10s +35 bps, ↔)

Credit Spreads (Major Bank 5Y Senior +67 bps, ↓2 bps / Tier 2 +125 bps ↓2 bps)

Oil (Brent US$97.10/bbl, ↑5.49%)

Gold (US$4,311/oz, ↓5.03%)

Global risk assets largely consolidated over the past week as investors balanced optimism around global growth and AI-driven earnings momentum (in the US at least) against renewed geopolitical uncertainty in the Middle East and a firmer interest rate outlook (US Fed).
The dominant narrative shifted from expectations of a near-term US-Iran peace agreement toward concerns that negotiations may be stalling, reintroducing energy supply and inflation risks into markets. Over the weekend we had further hostilities between Israel and Iran, although peace negotiations are apparently still ongoing.
Strong US labor data last week triggered the first meaningful (more than 2.0%) daily downshift in US stocks since January. A stronger than expected jobs market has fuelled expectations the Fed’s next move will be a rate hike, not a cut. At this stage, no rate hikes are priced in.

Global equities experienced heightened volatility last week as US labour market strength surprised to the high side, which reduced likelihood the Fed will cut rates anytime soon – with risk of hikes instead.
Middle East peace negotiation wobbles also put the jitters into investor’s risk appetite. Without a lasting peace deal the Strait of Hormuz remains largely shut, which will keep oil prices elevated and continue to act as a tax on household budgets.
Overnight, US markets rebounded somewhat – despite continued uncertainty in the Middle East – fuelled by dip buyers in the tech space.
Australian markets closed yesterday for the long weekend, but equities broadly underperformed global peers over the week (and YTD), reflecting the market's heavier exposure to financials, resources and domestic growth sectors rather than the AI-driven technology leadership evident in the US.

Bond markets remained under pressure. Investors continue to grapple with the prospect of "higher-for-longer" policy rates as resilient economic data, elevated oil prices and persistent inflation risks reduce the urgency for central bank easing. Long-dated government bond yields remain elevated, reflecting concerns about inflation, fiscal deficits and increased sovereign bond issuance.
Australian bond yields remained relatively elevated as investors continued to price a more hawkish RBA outlook than other major central banks, given ongoing concerns around inflation persistence and housing market resilience.
Markets increasingly accept that the RBA is unlikely to cut rates in the near term, with some economists still debating the possibility of additional tightening if inflation expectations deteriorate further or energy prices remain elevated.
The RBA continues to emphasise that inflation risks remain skewed to the upside, particularly given geopolitical uncertainty and oil market disruption linked to the Strait of Hormuz conflict. Same as last week.
At this stage, one more hike is priced in (futures), most likely around year end. Consensus is mixed, torn between one more hike and no more hikes.

Credit conditions remain constructive, with bank and securitisation spreads generally stable despite global volatility, supported by strong demand for high-quality income assets.
Credit markets remain supported by resilient economic data and healthy corporate balance sheets, although valuations leave little room for disappointment should growth soften or geopolitical risks escalate.

Brent crude experienced another volatile week, oscillating between peace optimism and renewed supply concerns.
Early-week weakness reflected hopes for progress in US-Iran negotiations, but prices recovered as confidence in a near-term resolution faded and concerns resurfaced regarding shipping and security around the Strait of Hormuz. Brent is currently trading around US$94/bbl.
Gold weakened over the week as stronger US employment data pushed bond yields and rate expectations higher.
The traditional safe-haven bid from geopolitical tensions was largely offset by rising real yields and a stronger US dollar, highlighting that monetary policy expectations remain the dominant driver of precious metals.