Macro Pulse: Are financial markets about to see some turbulence?

Financial markets may face renewed turbulence in the autumn as geopolitical escalation, persistent inflation and rising public debt increase pressure on rates and bonds.

• Middle East tensions have disrupted shipping through the Strait of Hormuz, but Goldman Sachs estimates that regional oil exports have recovered to about two-thirds of pre-war levels through alternative routes and pipelines.
• Brent crude remains elevated, while diesel and liquefied natural gas markets continue to show stress because LNG shipping cannot be replaced by pipelines or smaller-vessel transits.
• US PCE inflation is currently 3.7%, has not been below the Federal Reserve’s 2% target since February 2021, and hawkish comments from Fed Chair Kevin Warsh have increased expectations of a rate hike later this month.
• US long-term bond yields have continued to rise despite the Treasury’s announcement of a larger buyback programme, reflecting stronger growth, higher inflation risks and possible monetary tightening.
• US national debt passed $40 trillion in August 2026, compared with $20 trillion a decade earlier, increasing the fiscal burden as borrowing costs rise.
• Markets have remained resilient because of strong economic growth and corporate earnings, but upcoming elections, the UK budget on 28 October and the expiry of the US-China trade truce in November add to headline risk.

Takeaway: Investors should prepare for both risks and opportunities as higher yields and inflation threaten bonds and broader markets, although successful de-escalation in Iran could reduce these pressures.