Monday: Way Cleared for Warsh to Be Fed Chair

The closure of the Strait of Hormuz has taken roughly 10 million barrels per day off the global oil market, as Iraq, Kuwait, the UAE and even Saudi Arabia report significant shut‑ins. ANZ’s Daniel Hines warns that only a fraction of this lost output can be restored in the near term, with permanent damage likely erasing about 2 million barrels daily. Consequently, the supply deficit has shifted from a modest surplus to a multi‑million‑barrel shortfall, pushing Brent and WTI futures above $100 a barrel this quarter and keeping prices elevated well into 2026.

On the monetary front, the Senate has cleared President Trump’s nominee, Kevin Walsh, to become Federal Reserve chair, removing a major source of policy uncertainty. ANZ economist Henry Russell notes that Walsh joins a twelve‑member FOMC, limiting his ability to alter the Fed’s reaction function. As a result, the committee is expected to maintain a wait‑and‑see stance, with the first interest‑rate cuts unlikely until September, provided the Middle‑East tensions do not flare again. Markets have already priced in a modest rally, with the S&P 500 hitting fresh highs.

Elsewhere, central banks in the UK, Indonesia and the Philippines are also on hold, wrestling with inflationary pressures and volatile currencies. The Bank of England faces stubborn cost‑push inflation, while Bank Indonesia prefers targeted interventions over outright rate hikes. In the Philippines, recent rate hikes aim to anchor inflation expectations as price spill‑overs emerge. Coupled with a dip in US consumer sentiment, these dynamics underscore a fragile growth outlook. Investors should monitor policy shifts and the evolving oil supply crunch, as both will shape market volatility through the remainder of the year.