Bitunix Analyst:US-Iran Ceasefire Talks Advance—but Global Markets Are Now Worrying About Something Bigger Than War

May 25 — Global markets are fixated on U.S.-Iran talks and the reopening of the Strait of Hormuz, but capital is now zeroing in on a far bigger question: When high inflation, high interest rates, and sovereign debt risk collide, do central banks still have the firepower to stabilize markets like they’ve done for over a decade? While a U.S.-Iran framework is gradually coming together — including a limited reopening of the Strait of Hormuz, a 60-day interim deal, and restarted nuclear negotiations — major gaps remain on highly enriched uranium, sanctions relief, asset unfreezing, and the Lebanese front. That means even as markets start pricing in de-escalation, capital hasn’t fully flipped back to a full risk-on mode. More notably, markets are seeing a phenomenon rare over the past two years: rate hike expectations are making a comeback. U.S. rate futures now fully price in a Fed rate hike as early as October, with a 25bps increase locked in by year-end. Fed Governor Christopher Waller has explicitly stated the Fed could hike if inflation expectations become unanchored, while ECB officials have started openly talking about a June rate hike. The market’s long-held hope — that “rate cuts would save the day” — is slowly being replaced by the narrative of “higher rates, for longer.” The core driver here is global bond markets pushing back against the decade-old assumption that “central banks will always backstop markets.” As Mohamed El-Erian puts it, through every prior crisis — the 2008 financial crisis, pandemic, wars — markets counted on central banks rescuing risk assets via rate cuts, quantitative easing (QE), and fiscal stimulus, making “buy the dip” the most profitable global trade for years. But now, high inflation, heavy debt loads, and sovereign credit pressure are limiting how much central banks can intervene. For the first time, markets face a situation where “policy wants to rescue — but might not be able to.” This structural shift is causing a sharp bifurcation across global assets. On one side, U.S. AI and tech giants are still holding steady, supported by lingering liquidity and growth narratives. On the other, U.S. Treasury yields, Japanese long-term bonds, and European debt markets are all whipsawing in lockstep. Capital is now reexamining a basic rule: If central banks can no longer provide unlimited liquidity, every high-valuation asset needs to be repriced against real rates and discounted cash flow (DCF). In crypto, Bitcoin (BTC) could see near-term support from improving risk sentiment amid Middle East de-escalation. But if global rates markets keep pricing in hikes, assets with high leverage or rich valuations will face liquidity contraction pressure. The biggest wildcard for markets isn’t war anymore — it’s whether the global policy toolbox is starting to lose its hold on asset prices.