Treasuries, Stocks Drop, As Violence Near Hormuz Lifts WTI Toward $95, Rate Hike Odds To 59%: Sept. 8, 2026 — 2026-09-08
What moved & why: Middle East geopolitical tensions near the Strait of Hormuz drove WTI crude toward $95/barrel, reigniting inflation concerns and triggering a broad risk-off move across equities and fixed income. The hawkish repricing reflects growing odds of a Fed rate hike in eight days.
Cross-asset:
- Equities: All four major benchmarks retreated; 7 of 11 principal sectors posted losses
- Treasuries: Bear-flattening curve with shorter tenors climbing; yields rising on rate-hike expectations
- Rates: September 25-bp hike odds now at 59% (Warsh-led Fed)
- Oil: WTI nearly $95/barrel on Hormuz violence
- Precious metals & crypto: Gold, silver, and bitcoin declining amid tighter liquidity; volatility protection instruments and USD nearly flat
- Prediction markets: Catching bids
Econ / Fed angle: NFIB Small Business Optimism Index declined to 98.7 (miss vs. 99.3 consensus) as firms cite high fuel costs, elevated credit expenses, and tariff uncertainty pressuring earnings and hiring. Friday's CPI expected at 3.4%; if WTI stays above $90, September CPI could reach high 3s, nearly guaranteeing a 25-bp hike. Core inflation remains cooperative in low 2s. A hotter-than-expected print (3.5%–3.6%) would "almost surely" raise hike odds toward 75%; a miss (3.3%) could justify another pause.
Watch next:
- Thursday & Friday: PPI and CPI reports (critical for Fed decision)
- Sept. 16: Fed rate decision (25-bp hike vs. pause hinging on inflation data)
- Oil trajectory: WTI below $90/barrel needed to prevent headline inflation reacceleration