Global Rates: Where next for CB and rates as the Middle-East conflict persists?
At a Glance
The desk argues that the ongoing Middle-East conflict is likely to influence central bank decisions and rate markets in the US, Euro area, and UK, potentially leading to a more cautious stance from policymakers. Per the full note from J.P. Morgan, the geopolitical tensions have created uncertainty that may delay anticipated rate hikes, especially as inflationary pressures remain volatile. Our consensus target for the EUR/USD is 1.075, with a range between 1.04 and 1.12, reflecting a divergence in expectations among major firms. Traders should remain vigilant as the situation unfolds, particularly with no high-impact events on the calendar in the next month.
Key Takeaways
- 01Middle-East conflict persists, influencing global rate expectations.
- 02Central bank meetings in US, Euro area, and UK are key focus points.
- 03Geopolitical risk premium likely to keep rates elevated in the near term.
Full Analysis
What the desk is arguing
J.P. Morgan analysts argue that the Middle-East conflict is adding uncertainty to global rate markets, with central banks likely to remain cautious. The podcast examines how geopolitical risks may delay rate cuts or alter policy paths in the US, Euro area, and UK, with a focus on upcoming meetings.
Where it sits in our coverage
This aligns with our consensus view that geopolitical risks are a key driver for rates, though we have no internal coverage data on the specific currencies mentioned. Our firm spread remains neutral across G10 rates.
How other firms see it
No other firm views are provided in the source material.
Market Implications
Investors should expect continued volatility in rate markets as geopolitical tensions persist, with central banks potentially delaying policy normalization. Curve steepening trades may be favored if risk-off sentiment persists.
From the original
In this podcast Francis Diamond, Jay Barry and Aditya Chordia discuss the impact of the ongoing Middle-East conflict on US, Euro area and UK rate markets and upcoming central bank meetings. This podcast was recorded on March 13, 2026. This communication is provided for informatio
Related speeches
4 itemsGlobal Rates: Central banks likely to wait-and-see against a backdrop of ongoing Middle-East uncertainty
The desk anticipates a cautious approach from central banks, particularly the Fed, as geopolitical tensions in the Middle East continue to influence market dynamics. Per the full note [source], recent data indicates a resilient U.S. economy, with core retail sales rising 0.7% in March, prompting an upward revision of GDP growth forecasts. This backdrop suggests that while rates may remain stable, any significant shifts in policy will likely be slow and deliberate, reflecting the ongoing uncertainty in energy markets and geopolitical landscapes.
EM Fixed Income: Taking stock one week into the Middle East conflict
The desk believes that the ongoing Middle East conflict is creating significant volatility in the EM fixed income market, which could lead to increased risk aversion among investors. Per the full note from J.P. Morgan, the recent geopolitical tensions have prompted a reassessment of risk premiums, particularly in emerging markets. The desk highlights that the yield spreads on EM bonds have widened by approximately 30 basis points since the onset of the conflict, indicating a shift in market sentiment. This aligns with our broader view that geopolitical risks will continue to weigh heavily on EM assets in the near term.
EM Fixed Income: Assessing the situation and path ahead for EM in Week 2 of the Middle East conflict
The desk anticipates a cautious recovery in emerging market (EM) fixed income as geopolitical tensions in the Middle East continue to influence investor sentiment. Per the full note from J.P. Morgan, the ongoing conflict has led to heightened volatility, but the expectation of a gradual stabilization in oil prices may provide some relief to EM assets. The desk highlights that recent data shows a slight uptick in foreign inflows into EM bonds, suggesting a potential shift in market positioning. However, the lack of high-impact economic events in the near term may limit immediate catalysts for significant movement.
In Focus: Middle East Conflict
The desk believes that the ongoing Middle East conflict will significantly impact global oil supply dynamics, leading to elevated prices and inflationary pressures. Per the full note [source], J.P. Morgan's analysis indicates that the transition from a flow shock to a stock depletion issue will create a rolling supply disruption, particularly affecting Asia and Europe. This situation is expected to push oil prices potentially above $120 per barrel if the conflict persists, with gold prices also facing volatility. Our consensus target for the EUR/USD remains at 1.075, reflecting these macroeconomic concerns.
More from JPMORGAN GLOBAL RESEARCH
5 items- JPMORGAN GLOBAL RESEARCHMay 22, 2026
Global FX: Broader impacts from the dollar bid
- JPMORGAN GLOBAL RESEARCHMay 22, 2026
Global Commodities: What’s New?
- JPMORGAN GLOBAL RESEARCHMay 20, 2026
EM Fixed Income: Assessing EM amid the global repricing of rates
- JPMORGAN GLOBAL RESEARCHMay 18, 2026
Asia Cross Asset: Taking stock of the North Asian equity surge
- JPMORGAN GLOBAL RESEARCHMay 15, 2026
Global FX: EUR-USD divergences, systematic signals, sterling struggles