Jackson Hole Hawks and New Middle East Clashes

Michalis Efthymiou, August 31, 2026

The US and Iran exchanged fire for the first time since July, quickly driving oil prices back above $85 per barrel. According to reports, the US struck rocket launchers on Larak Island, located near the key Strait of Hormuz chokepoint.

Market sentiment had been improving over the previous week as oil fell below $80 and NVIDIA’s earnings report beat expectations. Economists also continued to expect the Federal Reserve to pause in September. However, as crude oil prices have remained above $80 per barrel for three weeks, hopes for a pause are weakening.

Jackson Hole - Warsh Increases the Hawkish Tone
Other than the geopolitical developments, US monetary policy is particularly interesting and is triggering volatility among US Dollar pairs. The Fed Chair’s speech on 28 August was significantly more hawkish than most analysts were expecting.

According to Mr Warsh, inflation remains too high, while the economy continues to show resilience. July PCE inflation was running at 3.7% year-on-year, and Warsh said recent data had not convinced him that underlying inflation pressures were improving sufficiently. At the same time, he described economic activity as strong, supported by stable labour markets, solid business investment, and healthy corporate profits. This gives the Fed less reason to tolerate persistent inflation out of concern that tighter policy could push the economy into recession.

The Chair said credit and lending markets showed few signs that current monetary policy was restraining the economy. This was particularly important because it suggests the current 3.50%-3.75% Federal Funds Rate might not be restrictive enough. Economists view this as an indication that interest rates need to rise in order for inflation to come down.

US-Iran Clashes Push Oil Prices Higher
US forces struck two Iranian rocket launchers on Larak Island, near the Strait of Hormuz. US officials said Revolutionary Guard forces were preparing to launch rockets carrying sea mines into the key shipping route.

Iran reported casualties from the attack and subsequently retaliated by launching ballistic missiles towards US bases in Jordan. Reports indicated that nearly all incoming missiles were intercepted, with no significant impact. The confrontation is increasing concerns over further escalation and potential disruption to shipping.

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Publication date:

31 August 2026 - 11:02 (GMT)

Crude Oil - Back Above $86!
Crude oil opened with a bullish price gap measuring 1.70%. The price thereafter rose even further above $86, but has since lost momentum. However, even with the retracement, the price is maintaining a bullish price indication. The price is remaining above the trendline and moving average. However, the price is slightly below the VWAP, though this may indicate the possibility of entering at a competitive price. While the price on the 5-minute timeframe remains above the 200-bar simple moving average, buy signals are likely to remain intact.

Key Takeaways:
- US-Iran tensions have escalated again following the first direct exchange of strikes since July.
- Crude Oil has moved back above $85 per barrel, increasing concerns over potential supply disruptions through the Strait of Hormuz.
- Fed Chair Kevin Warsh adopted a more hawkish tone at Jackson Hole, stressing that inflation remains too high.
- Higher interest rate expectations have provided support to the US Dollar, despite the current retracement.
- This week’s US employment data, particularly NFP, will be a key driver of Fed expectations and market volatility.