Markets ended the week clinging to hope. President Trump posted on Sunday that a deal with Iran would be "announced shortly", but by Monday morning negotiators were being told not to rush.  After more than ten weeks of disruption, roughly 13% of the world's daily oil consumption is still not moving, and the physical squeeze is now visible at the till: Walmart, Costco and Toyota in the US flagged motor-oil shortages, and Asian petrochemical capacity has been cut by around 40%. Brent finished the week near US$103 a barrel after a 109-to-102 round trip.

The bigger story for clients is what stubborn oil prices are doing to central banks. The Fed's most reliable dove, Governor Christopher Waller, used a Frankfurt speech on Friday to abandon his easing bias, conceding that energy-driven inflation is "rippling through the economy in a broader wave". Kevin Warsh was sworn in as Fed Chair the same day. The result: futures now fully price a 25 basis point Fed hike by year-end, a remarkable swing from rate-cut expectations only weeks ago. US 30-year Treasury yields touched 5.19% mid-week, the highest since 2007, before settling around 5.05%.

In Australia, the economic cracks are also starting to show. Unemployment surprised sharply higher at 4.5% (from 4.26%) and the employment-to-population ratio hit a four-year low. That softens the case for an immediate June RBA hike although the RBA's chief economist Sarah Hunter was openly hawkish. Pricing now implies a cumulative 35 basis points of tightening by year-end.

The implications of the Australian Budget continued to ripple through domestic financial markets, news desks and popular debate. The Treasury modelling of a wind-back of negative gearing on established dwellings and the move from a 50% CGT discount to indexation (from 1 July 2027) has implied a modest 1–5% drag on house-price growth but the performance of banks, recent auctions and prominent property market forecasters has pointed to bigger falls up to 10% in the near to medium term. 

A genuine breakthrough on Hormuz could shift the curve 25–50 basis points lower in a single session, and equity markets have rallied on far thinner news. The Australian dollar held a tight range around 71.3 US cents. NVIDIA delivered another beat, lifted its dividend and announced a whopping US$80bn buyback, a reminder that the AI capex cycle is real, even as the macro narrative darkens. However, the weight of expectations on this stock and question marks about the whole AI roll-out will be monetised meant that it was actually down for the week. All this suggests that volatility is likely to remain a constant even if and when the Strait of Hormuz are finally open again.