Oil Returns to Pre-War Levels as Robin Brooks Signals Shift in Fed Rate Hike Expectations

According to Robin Brooks, a senior fellow at the Brookings Institution and former Goldman Sachs FX strategist, on July 5, crude oil prices have returned to pre-Middle East war levels, with the Strait of Hormuz seeing rapid normalization in crude shipments. Brooks noted that Saudi Arabia and the UAE pipelines now bring Persian Gulf oil supply volumes close to pre-war levels, indicating the supply shock has largely ended.

Brooks argued that market expectations for additional Federal Reserve rate hikes are overblown, with little supporting evidence. He pointed out that U.S. short-term real interest rates could decline once energy prices ease inflation pressures, potentially triggering dollar weakness, gold price gains, and further upside for U.S. equities. The July 14 release of U.S. consumer price data will be a critical inflection point for these market adjustments, Brooks said.