This Week in Markets: Wednesday 02 September 2026

Two shocks landed in the same week: Fed Chair Kevin Warsh told Jackson Hole that inflation is still "running too high" and pushed September rate-hike odds from 35% to 57%, then US forces struck Iranian rocket launchers on Larak Island and Brent crude crossed $90 for the first time since the conflict resumed. By Wednesday morning, after a fresh overnight escalation, Brent was at $95.13, WTI was through $90.65, and oil had become the week's most consequential macro variable.

The Australian read-through is direct. Every sustained $10 rise in oil adds roughly 0.3-0.4 percentage points to Australian CPI. The trimmed mean is already at 3.6%, unchanged from June, with a monthly pulse of 0.5% in July, the largest monthly rise in a year. Today's Q2 GDP print of 0.2% confirms a consumption-constrained economy. The RBA meets on 29 September, and NAB is already calling a 25bp hike to 4.60%. An oil spike to $95 just made that call harder to argue against.

Warsh's Jackson Hole speech on Friday 28 August set the tone for everything that followed. The new Fed Chair said inflation is running above target and the Fed's "predominant focus right now should be on prices," sending the probability of a September FOMC rate hike from 35% to 57% in hours. The 2-year Treasury yield jumped 8 basis points; the 10-year moved toward 4.72%. The S&P 500 fell 0.25% to 7,711, the Nasdaq -0.52% to 26,402, and the Dow held flat at 53,559. PayPal fell 12% after a reported acquisition bid from Stripe and Advent collapsed.

Monday 31 August was more dramatic intraday than at the close. News broke on Sunday AEST that US forces had struck Iranian rocket launchers on Larak Island inside the Strait of Hormuz, with Iran retaliating via drone attacks on UAE infrastructure and strikes near US military positions in Jordan. The Dow fell more than 400 points within the first hour, then recovered almost entirely through the session and closed near flat. Energy names led the intraday rebound. Brent crude was the clearest read: up 2.8% to US$90.57, its first close above $90 since the conflict's most recent escalation phase.

Tuesday's US session confirmed the rate-hike trade is back in charge. The S&P 500 fell 0.34% to 7,685, the Dow dropped 0.70% (-374 points) to 53,185, and the Nasdaq shed 1.02% to roughly 26,133. Information Technology (-1.6%) led the selling; six of 11 sectors finished negative. Net three-session move for the S&P 500: approximately -0.7% from Friday's close. Overnight Tuesday/Wednesday, a fresh round of Iran escalation sent Brent another 5.1% to $95.13 and Deutsche Bank brought forward its US rate-hike base case to account for the oil-supply risk.

The ASX held up better than the macro backdrop warranted. Friday 28 August: ASX 200 +0.3% to 9,069. Monday 31 August: -0.2% to 9,076, with materials the worst sector (-1.9%) as BHP fell 1.1% and Rio Tinto gave back 0.7%; banks carried the index, with Westpac +1.9%, CBA +1.7%, ANZ and NAB both up 1.5-2.1%. Tuesday 1 September: -0.1% to 9,066, energy +1.2% and materials +0.6% offsetting consumer cyclicals (-1.7%), technology (-1.4%), and consumer staples (-1.4%) as rate-sensitive sectors repriced. PEXA Group (PXA) was the standout on Monday, up 9.4%.

The number that matters most for Australian portfolios this week is the 10-year bond yield at 5.16%, its highest since April 2011. That is the real economy in motion. Today's Q2 GDP print of 0.2% confirms what the bond market has been signalling: consumption is constrained, growth is below trend, and the household sector is under stress. The Cotality Home Value Index showed national home values down 0.9% in August, a fifth consecutive monthly decline. Sydney and Melbourne are the steepest; Brisbane and Adelaide are now also posting consecutive monthly falls. The median dwelling value is $912,885. Dwelling approvals fell 3.6% in July. None of this points to a property market that is finding a floor.

Gold is the counterintuitive story of the week. A geopolitical flare-up in the world's most important oil chokepoint would normally lift bullion. Instead, it fell 5.5% across five sessions, from US$4,631 on Friday to US$4,375 by Wednesday morning. The explanation is the Warsh rate-hike trade: when the market reprices toward higher-for-longer US rates, bond yields rise, the US dollar strengthens, and gold (a non-yielding asset) sells off. Gold is not a simple geopolitical hedge. It is a real-yield trade. Right now, rising real yields are winning that argument.

Oil moved in the opposite direction. Brent crude rose from approximately US$87-88 last Friday to US$95.13 Wednesday morning, a gain of roughly 8% across four sessions, including a 5.1% overnight surge after fresh Hormuz escalation. WTI is at US$90.65. The Strait of Hormuz carries approximately 20% of global seaborne oil; a sustained closure would be a direct supply shock with global CPI consequences. Iron ore is a quieter constructive: at US$99.25 per tonne on Tuesday, a five-week high, supported by Chinese steel-mill restocking signals. The AUD/USD held at 0.7166 despite the risk-off backdrop, supported by Australia's commodity export terms of trade.

Reporting season is in its final days and the last few results delivered a clear message about where the stress is. Star Entertainment (SGR) posted a full-year loss of $307 million and included a going-concern warning in its accounts, flagging "material uncertainties" about its viability. Pinnacle Investment Management fell 9.9% on Tuesday following a results disappointment; fund flows and margin were the market's concern. REA Group (REA) shed 3.9% on Tuesday, a direct read-through from housing weakness: five straight monthly falls in home values means lower transaction volumes and a thinner pipeline for listing revenue. That chain of causation is not finished.

On the positive side, Judo Capital rose 7.3% on Tuesday, suggesting business lending credit quality is holding better than the macro backdrop might imply. Liontown Resources (LTR) put together back-to-back gains of 2.5% on Monday and 6.7% on Tuesday, in a deeply sold-down lithium sector where any positive momentum gets amplified quickly. The structural winner of the week is the energy sector. Beach Energy (BPT) and Santos (STO) are direct beneficiaries of the oil-price move. That exposure is doing exactly what commodity-linked holdings are meant to do in an oil-supply shock.

On Sunday AEST (Monday Australian trading), US forces struck Iranian rocket launchers on Larak Island inside the Strait of Hormuz. Iran responded with drone attacks on UAE infrastructure and strikes near US military positions in Jordan. The action reversed a period of relative calm in the Hormuz corridor, reintroduced a material supply-risk premium into oil pricing, and sent Brent through $90 for the first time since the conflict's most recent escalation phase. Overnight Tuesday/Wednesday, a fresh round of Iranian escalation pushed Brent to $95.13. The conflict is past its 180th day. The 60-day US-Iran memorandum of understanding signed in June lapsed on 17 August without extension, and the current framework being negotiated by Iran and Oman (inbound traffic managed by Iran, outbound by Oman) was close to agreement before Monday's strike reset the negotiating table.

The tail risk here is not the current oil price. It is a sustained closure of the Strait. The chokepoint handles approximately 20% of global seaborne oil and significant LNG volumes; even a 30-day partial closure would stress global supply chains well beyond what $95 Brent currently prices. The second trade-war front remains open: the US imposed 50% tariffs on approximately US$20 billion of Canadian goods from 21 August, and Canada's retaliatory tariffs on roughly 700 US product categories are scheduled for 8 September. PM Mark Carney has framed the situation as Canada being "at war" economically with the US. The 8 September date is the next live escalation point in that front.

• RBA 29 September meeting. NAB is calling a 25bp hike to 4.60%. CBA and ANZ lean toward November. Westpac holds for a pause. A Brent price sustainably above $90 adds roughly 0.3-0.4 percentage points to Australian CPI, which is a direct complication for a board trying to land a soft-enough path on an economy printing 0.2% GDP growth. The oil trajectory over the next three weeks matters more for the September RBA call than any single domestic data point.
• Hormuz Iran-Oman framework. The bilateral shipping arrangement was close to finalisation before Monday's Larak Island strikes reset the negotiating environment. Whether the framework survives the escalation is the most consequential near-term question for oil, global CPI, and portfolio positioning. A de-escalation agreement brings Brent back toward $88-90; a sustained Strait closure takes it materially higher.
• Canada 8 September retaliation. Unless a deal emerges in the next six days, Canadian tariffs land on steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics targeting approximately US$20 billion of US goods. Two live trade-war/geopolitical fronts running simultaneously is the stagflation-adjacent environment that fixed-income and commodity markets are currently pricing.