Markets closed the week ending 19 June 2026 in risk-on mode, driven by a signed US-Iran memorandum of understanding that sharply eased the Hormuz risk premium. WTI crude fell (9.8%) WoW to $76.6/bbl as Iran agreed to reopen the Strait of Hormuz. This overshadowed a hawkish shift from the Fed, whose new Chair Kevin Warsh removed the projected 2026 rate cut, and a Bank of Japan hike to a 31-year high of 1.0%. Equities extended gains broadly (S&P 500 +0.9%, Nikkei +7.9%), though Accenture’s guidance cut and resulting 20% stock collapse. The same AI-disruption fears are showing up in credit, where the S&P BDC Index fell (3.6%) even as broader risk assets rallied.
Key Themes
- Hormuz Risk Premium Unwinds on a Signed MOU: Trump and Iranian President Pezeshkian signed a 14-point memorandum of understanding at Versailles on 17 June, providing for toll-free Hormuz transit within 30 days, IAEA-supervised uranium down-blending, and up to $300bn in reconstruction financing tied to compliance.
- Fed Turns Hawkish Under New Chair: Warsh’s first meeting held rates at 3.50–3.75% but removed the 2026 cut from the dot plot (9 of 18 officials now project at least one hike). The US 2Y rose +9.58bps WoW to a one-year high of 4.177%, while the 10Y fell (2.56bps) to 4.45%, as oil’s collapse offset the long end’s inflation premium. Policy-path repricing and term-premium compression moved in opposite directions in the same week.
- BoJ Hikes to a 31-Year High, Yet JGB Yields Fall and the Yen Weakens: The BoJ raised its policy rate 25bps to 1.0%, fully priced in beforehand. JGB 10Y fell (5.40bps) to 2.628% and USD/JPY rose 0.7% to 161.30, a clean “priced-in, sell the news” pattern on both the bond and the currency.
- AI Disruption Moves from Theory Into Earnings and Credit Quality: Accenture’s guidance cut, despite an EPS beat, triggered an 18% single-day collapse on fears AI is structurally eating consulting demand. The same theme shows up in credit: the S&P BDC Index fell (3.6%) WoW, with software-exposed borrower books flagged as a specific concern. Two asset classes, one narrative.
- Equity Strength Diverges Sharply by Geography and Sector: Nikkei surged +7.9% WoW on AI-capex and chip beneficiaries; NASDAQ gained 2.6% in a four-day week; yet Nifty IT fell (1.33%) and Hang Seng (3.2%) lagged badly. Breadth is improving in aggregate but is increasingly sector- and geography-specific rather than uniform.
