Strait of Hormuz opening will lower odds of Fed raising rates this year: Piper Sandler's Kantrowitz

TITLE: Strait of Hormuz reopens lowers odds of Fed rate hike, says Piper Sandler analyst

META: Piper Sandler's Kantrowitz says the reopening of the Strait of Hormuz cuts the probability of a U.S. rate increase this year, a key signal for bond and equity markets.

The Strait of Hormuz reopened, prompting Piper Sandler equity strategist Kantrowitz to say the move reduces the likelihood of a Federal Reserve rate hike in 2026 [2].

Market context

The reopening comes after weeks of heightened geopolitical tension that had pushed oil‑related inflation expectations upward. While the video does not provide a specific probability shift, Kantrowitz’s comment suggests that the supply‑side shock from the blockade is easing, which could temper inflation pressures and give the Fed more flexibility to hold rates steady. Historically, major supply disruptions have led to higher inflation and, consequently, tighter monetary policy; the current de‑escalation may therefore reverse that pattern.

Potential impact on rates and assets

If the Fed perceives lower inflation risk, the probability of an additional rate hike before year‑end could fall below the market’s prior expectations (often around a 30‑40% chance at this stage of the cycle). A reduced hike probability typically supports higher‑yielding assets such as equities and lowers yields on Treasury securities, while also easing the dollar’s upward bias against other currencies. However, the video does not quantify the market’s immediate reaction, leaving the exact price impact open.

What to watch

• Federal Reserve minutes from the upcoming July meeting for any language on inflation outlook and rate path.
• U.S. Treasury yields, especially the 10‑year note, for moves that would reflect changing rate‑hike expectations.
• Oil price trends, as further supply‑side developments could revive inflation concerns and alter the Fed’s stance.

Kantrowitz’s assessment underscores how quickly geopolitical events can reshape monetary‑policy expectations, but the precise market response will depend on subsequent data and the Fed’s own assessment of inflation dynamics.