The Federal Reserve is a key topic of discussion in the markets. The Fed raised interest rates by 25 basis points, bringing the policy rate to the 3.75%–4.00% range. The decision was unanimous. The Fed’s message is clear: inflation remains high, and geopolitical developments are increasing uncertainty. In other words, developments regarding oil have become a significant risk factor for the Fed.
However, the situation regarding oil is currently complex. Saudi Arabia’s East-West Oil Pipeline remains largely out of commission. This pipeline is critical for transporting Saudi oil—which cannot pass through the Strait of Hormuz—to global markets via the Red Sea. Plans are in place to restart approximately half of the pipeline within a few days. While this news has pushed oil prices down, it is too early to say that the supply issue has been resolved.
China plays a particularly important role here, as it is the world’s largest importer of crude oil. For some time, it had been managing this shock by drawing down its inventories. Now, as it begins to purchase more oil from the market again, it is introducing new demand into an already tight physical oil market.
For this reason, trade talks between Washington and Beijing are being closely monitored. Trump and Xi Jinping are expected to meet in Washington on September 24. Trade tariffs will be a central topic, while competition in artificial intelligence and technology will also feature prominently on the agenda.
In Europe, energy prices have become a direct inflation issue. The ECB projects Eurozone growth at 0.9% for 2026, with rising energy prices representing a significant upside risk to the inflation outlook.
In the UK, inflation rose to 3.1% in August. Given the surge in energy prices, the markets are paying close attention to the Bank of England’s signals regarding its future interest rate policy. The BoJ’s interest rate decision is particularly significant, as Japan’s monetary policy is closely monitored regarding the global interest rate balance.
On the geopolitical front, the U.S. House of Representatives passed a comprehensive new package of sanctions against Russia by a vote of 262 to 159. The bill now awaits President Trump’s signature. The package targets Russia’s energy sector and the “shadow fleet” used to circumvent sanctions.
I will be keeping a close eye on three things in particular: how long it takes for oil supplies to return to normal, how the Fed maintains its interest rate policy despite the energy shock, and how much progress the U.S. and China can make on trade leading up to the Trump-Xi meeting. This is because oil, interest rates, and geopolitics are not separate issues today; a change in one directly affects the others.
