This night, the U.S.-Iran conflict has clearly escalated compared to the past few days. Trump even went all out with harsh words: the agreement is worthless, and if Iran retaliates further, the U.S. will strike back harder, even threatening to wipe them out completely. There’s no sign of the war ending anytime soon. The Strait of Hormuz is still far from recovering, and oil prices are struggling to come down. Brent crude has surged back to around $96, gradually impacting transportation, production, and consumption, turning into sustained inflationary pressure. Walsh just said a few days ago: if inflation doesn’t come down, rate hikes might continue. Barr also made it clear that if inflation doesn’t cool enough, decisive action should be taken. In just one week, market expectations for a 25 basis point rate hike in September have jumped from under 40% to about 67%. The deciding factor might be the September 11 CPI report. If inflation exceeds expectations again, coupled with oil prices nearing $100, it’ll be increasingly hard for Walsh to justify not hiking in September. The key question is, after a hike in September, will there be another one in December? The much-anticipated bull market might have to wait a bit longer...