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The U.S. Oil Sector’s Role in Restraining Prices

The start of the Middle East conflict in early 2026 caused an unprecedented drop in global petroleum supply. In response, oil prices jumped—but not to unprecedentedly high levels. The U.S. oil sector was a key factor in moderating the shock. For one, its steady increases in drilling helped create a large oversupply in the global market before the conflict, making it less of a challenge to offset the drop in Middle East oil output. In addition, U.S. commercial and government inventories were rapidly drawn down, filling half the gap between global supply and demand in the second quarter by some estimates. Inventories, though, are a limited resource and U.S. stockpiles stopped falling in July. As a consequence, the continued shortfall in global production has been managed by running down inventories in the rest of the world.

BoE Governor Bailey says there is a case for another 25bps hike if war doesn't end

Governor Bailey warned that another 25 bps rate increase could be justified if the conflict in Iran does not come to an end. Bailey stressed that the UK needs to limit the inflationary impact of the conflict, particularly given that domestic inflation pressures were already elevated before the energy shock. However, he pushed back against suggestions that the BoE has acted too late, arguing that the latest decline in oil prices was encouraging but that policymakers cannot place too much weight on short-term developments without clear evidence of a genuine peace process. He also refused to commit to a "two and done" outlook for interest rates, highlighting the uncertainty surrounding the conflict and noting that he hopes to have greater clarity on its outcome by December. Bailey also addressed market pricing, noting that the upward shift in the interest rate curve partly reflects higher r

October 2026 Core-Cast Inflation Preview + Important Update to Fed Views