Oil prices hit multi-month highs as Hormuz standoff deepens
Brent crude climbed to around $97 a barrel on Sept. 7, the highest level since July, as the standoff between the United States and Iran over the Strait of Hormuz showed no signs of easing. The crude oil surge in September has been driven by a widening disruption to one of the world's most critical energy shipping lanes, with the U.S. Navy continuing to blockade Iranian ports while escorting other oil-producing nations' vessels away from contested waters.
Iran has responded by declaring new restricted zones beyond the strait itself, escalating a confrontation that now threatens a larger share of global energy trade. The U.S. Navy has rerouted 59 commercial vessels and disabled three others as part of its ongoing blockade, according to U.S. Central Command data released in August. President Trump has also imposed a 20% fee on all cargo transiting the strait, adding roughly $30 million per supertanker to shipping costs.
Evidence — Caixin, Sept. 7, 2026, translated from Chinese: Goldman Sachs said if attacks on vessels in the Middle East escalate further, oil prices could rise to $120 a barrel; the bank's lower target is $80 if regional exports return to normal. Brent was trading near $97 a barrel.
The U.S. Energy Information Administration now estimates that roughly 600,000 barrels per day of oil supply remain disrupted by the conflict and that the disruption will persist through the end of 2027. The EIA raised its 2026 WTI crude forecast to $80.88 a barrel from $76.26 and its 2027 forecast to $65.39 from $60.76, reflecting the structural nature of the supply risk.
Fed hike expectations reshape global rate landscape
The energy shock is feeding directly into inflation expectations and central bank policy calculations. The Fed September rate hike probability has climbed to roughly 60% after Chair Warsh's Jackson Hole speech on Aug. 30, in which he characterized the U.S. economy as strong, the labor market at full employment and inflation as still too high. Markets now price in about 16 basis points of tightening for the September meeting and roughly 38 basis points of cumulative hikes by year-end.
The two-year Treasury yield rose to 4.416%, its highest since January 2025, while the 10-year yield climbed to 4.802%. Barclays and Societe Generale both now forecast rate hikes in September and December. Citigroup has pushed its first rate-cut expectation to 2027.
This tightening trajectory stands in sharp contrast to China's policy direction. The People's Bank of China conducted a 500 billion yuan three-month outright reverse repo operation on Sept. 7, locking in ample domestic liquidity even as U.S. rates climb. The policy divergence between Washington's anti-inflation priority and Beijing's domestic stimulus focus is creating a widening gap in global capital flows.
A-share market enters rotation phase amid volume decline
China's equity market is feeling the pressure from both directions. A-share trading volume fell to 1.76 trillion yuan on Sept. 3, down from a peak of 2.66 trillion yuan on Aug. 5, as the market's previous AI-driven rally lost momentum. The seal rate on daily limit-up stocks dropped from 93% on Sept. 1 to just 57% on Sept. 3, signaling a broad retreat in speculative sentiment.
The market is transitioning from a single-theme structural bull market centered on AI into a rotation phase where earnings verification and industrial logic matter more than pure sentiment. Capital is migrating into a dumbbell-shaped allocation: one end anchored in upstream materials with confirmed price increases, such as MLCC components and liquid-cooling systems for data centers; the other end in geopolitical hedges including defense stocks, gold and energy-related names.
The STAR 50 index fell more than 2% in early September trading, but brokerage and real estate stocks bucked the trend as investors bet on potential policy easing. This rotation reflects a market that is pricing in both the domestic liquidity support from the PBOC and the external headwinds from rising U.S. rates and elevated oil prices.
What to watch next
The August U.S. CPI and PPI data, due mid-September, will be the decisive test for whether the Fed actually hikes at its next meeting. A hotter-than-expected inflation reading would push Treasury yields higher and intensify pressure on growth-oriented equities globally. Meanwhile, China's August CPI and PPI figures, released Sept. 9, will show whether domestic demand is recovering enough to support an independent equity market trajectory.
The Hormuz Strait transit status remains the single most important variable for energy markets. If the standoff escalates further, Goldman's $120 oil scenario becomes plausible; if a diplomatic resolution emerges, the $80 floor could hold. Either outcome will ripple through inflation expectations, central bank policy and equity valuations for months to come.