The Federal Reserve’s rate decision is no longer straightforward after June brought weaker employment growth and softer inflation, reducing the immediate need for another interest-rate increase, but markets quickly changed direction as hostilities in the Gulf intensified and oil prices surged above $100 a barrel. At one point, federal funds futures placed the probability of a quarter-point rate hike close to 40%. The escalation then appeared to lose momentum over the weekend, helping Brent crude fall below $90 at the start of Asian trading, reducing part of the inflation risk. Oil remains the fastest-moving inflation risk, as Brent’s move above $100 directly increased the risk of higher headline inflation and threatened to raise transportation, manufacturing and distribution costs. Employment data complicate the case for lower rates, as weekly initial jobless claims recently fell to their lowest level since 1969, suggesting US companies remain extremely reluctant to dismiss workers. Tariffs return as another source of inflation, with new tariffs of 10% introduced across a range of goods under measures linked to combating forced labour.