Market Volatility: Oil relief on a “deal”
Myles Zyblock
June 15, 2026
A variable’s direction often matters more than its level for financial markets. And this seems to be the case again, with regards to oil. The oil price is high, but it has come down quite a lot since mid May. Lower oil, at the margin, is good for economic growth, particularly among the heavy oil importing countries like much of Europe and Asia.
The decline in oil is also having an immediate effect on inflation expectations, as shown in the accompanying chart. The 1-year U.S. inflation swap (blue line) has tumbled lower, alongside the price for oil (white line). It is down by ~10 bps today given the $4.50/bbl decline in the oil price.
Source: Bloomberg
There are very little in the way of details being offered at this stage on the deal that was announced between the U.S. and Iran. And it is also not clear whether the Strait of Hormuz can return to “normal” operations in a reasonable timeframe even though the U.S. administration believes that to be the case. But, for now, investors are starting to price in a return to normal and that has been a tailwind for the performance of financial markets via reduced inflation and growth risks.
The S&P 500 has rallied by about 1.9% today, as this note goes to press.
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