Markets Brace for US Rate Hikes Amid Oil Shock, Middle East Conflict

• Investor expectations for US interest rates have sharply shifted from cuts to potential hikes, with futures markets showing a near 50% chance of a rate hike by October.
• The primary driver for this change is the Middle East conflict, which has caused a significant surge in oil prices, impacting global inflation.
• Higher oil prices are expected to fuel inflation, making it difficult for the Federal Reserve to cut rates and potentially forcing them to consider further hikes.
• The Federal Reserve faces a dilemma: balancing a slowing US economy and job market with rising inflation pressures from oil prices.
• This US rate uncertainty has global implications, potentially strengthening the dollar and pressuring other central banks, including India's.