Oil prices have quietly unwound one of the most significant geopolitical risk premiums of the past year. Brent crude slipped to around $77 per barrel in late June 2026, dipping below $80 as tanker traffic through the Strait of Hormuz began to normalize following a US-Iran memorandum of understanding aimed at easing hostilities.

Two-year Treasury yields sat at roughly 4.15-4.19% in mid-June, comfortably above the Federal Reserve’s current target rate of 3.50-3.75%. That gap tells you something important: the market thinks the Fed isn’t done tightening. Energy may be cooling off, but the inflation problem has deeper roots.

The oil picture: back to baseline

The recovery of shipping flows through the Strait of Hormuz has been the primary catalyst behind crude’s retreat. With the US-Iran memorandum of understanding reducing the immediate threat of supply disruptions, Brent has drifted back toward levels seen before the geopolitical tensions escalated. But full normalization of shipping patterns and prices is expected to take weeks to months.

The Fed’s sticky problem

The Federal Reserve, now led by Chair Kevin Warsh, held its most recent meeting on June 17, 2026, and kept rates steady at 3.50-3.75%. Nearly half of Fed policymakers indicated they expect at least one rate hike before the end of 2026. Futures markets have started pricing in a meaningful probability of a move as early as September.

Two-year Treasury yields rose by 0.16% on June 17 alone, a notable single-day jump that reflects the bond market digesting the Fed’s forward guidance.