The nearly three-month-long conflict in the Middle East has driven energy prices sharply higher and reshaped the global rates outlook, as inflation concerns intensify following Tehran’s effective shutdown of the key strait.

U.S. President Donald Trump said on Sunday he had told his representatives not to rush into any deal with Iran and his administration played down hopes of an imminent breakthrough.

Just a day earlier, Trump said Washington and Iran had largely negotiated a memorandum of understanding on a deal that would reopen the waterway, which carried one-fifth of global oil and liquefied natural gas shipments before the war.

Chris Weston, head of research at Pepperstone, said markets have become less focused on the timing of a resolution and instead been keeping an eye on the tone of the headlines.

The tone has been ?consistently towards some sort of resolution … we've become very patient for a resolution deadline, he said.

Stock markets brushed off comments from Iran’s foreign ministry spokesperson on Monday saying that while many topics had been agreed, this did not mean Tehran is close to signing a peace deal.

The pan-European STOXX 600 climbed around 1% to 631.1, while Nasdaq futures were 1.4% higher and S&P futures were up 1%. However, liquidity was likely to be thin, with several markets including in Britain and the United States closed for public holidays.

The euro zone government bond market was on a tear, with Germany’s 10-year government bond yields hitting their lowest since April 8, last down almost 10 basis points while Italy’s 10-year yields fell to their lowest since April 17.

For much of the year, oil prices have steered broader markets, as investors sift often conflicting signals from Washington and Tehran since a fragile ceasefire took hold in April.

On Monday, oil prices hit two-week lows, with Brent crude futures down over $5, or about 4.9%, to $98.45 a barrel, while U.S. West Texas Intermediate was at $91.67 a barrel, also down about 4.9%.

Analysts expect oil prices to stay elevated even if there is a resolution in the near ?term, and they are unlikely to return to levels before the war as it will take time to remedy supply chain disruption from the conflict.

Last week, Barclays maintained its 2026 average Brent crude oil price forecast at $100, though it said risks are skewing higher.

The euro was up 0.3% at $1.1640, while the Japanese yen firmed to 158.91 per U.S. dollar as the safe-haven dollar gave up some of its recent gains.

In Asia, Japan’s Nikkei jumped roughly 3% to roar past the 65,000 level for the first time and Taiwan stocks rose to 43,644, both closing at record highs.

Global stocks have mostly shrugged off war worries to focus instead on all things AI and ?a strong earnings season, which has pushed equities to record highs through the year.

The increase in energy prices since the conflict began and the risk that prolonged disruptions will keep them high has prompted traders to bet on rate hikes across both developed and emerging markets.

Markets are now fully pricing in a 25-basis-point hike from the U.S. Federal Reserve in January 2027, a sharp shift from expectations before hostilities erupted in late February, when two ?rate cuts this year were anticipated.

The 30-year Treasury bond’s yield , which is seen as a barometer of geopolitical and fiscal risk, briefly touched its highest level since July 2007 last week, but has pulled back from that milestone. There was no cash trading on Monday, but 30-year futures were up a full percentage point.

Data on Friday showed U.S. consumer sentiment fell to a record low in May as ?surging gasoline prices linked to the Iran war intensified affordability concerns just as Kevin Warsh was sworn in as chair of the Fed.

For the Federal Reserve, this creates a difficult balancing act, said Bruno Schneller, managing partner at Erlen Capital Management.

On the one hand, consumers feel the pinch of higher financing costs, lower income growth and softer hiring, but on the other, inflation remains high, Schneller said. ↑

On Friday afternoon, as I sat down to work on this column, I honestly didn't know where to focus first.

Was the biggest issue the loss of integrity in our public life, after the Prime Minister ("my word is my bond") admitted saying 50 times he would not change any of the rules around investment properties but did it anyway?

Or was it the reality, confirmed in the budget papers, that under Labor’s record high immigration, Australia will hit 30 million people by 2030, despite nowhere near enough housing for those here now? Or was it the revelation that Labor has just brought in death duties by stealth?

Giggle v Tickle

As I debated all of this, the Federal Court handed down its decision in the long-running Giggle v Tickle case, where Sall Grover, a woman and founder of a women’s online networking app (called Giggle For Girls) was accused of discrimination against a transgender woman, the biologically male Roxanne Tickle, who sought to join the women-only app.

In a devastating blow for the rights of women and girls in this country, the court rejected scientific fact and declared that sex was more than biology (it isn't), and so Grover lost and now owes compensation to Tickle.

The fact that the taxpayer-funded Human Rights Commission was a part of this legal action to deny all women our biological rights is appalling. The fact that Grover now has to rely on donations from ordinary people to defend rights that should not need defending says everything about the state of woke policy and activist courts in Australia.

But what’s perhaps most galling of all is that we are only in this position of denying chromosomal reality because Julia Gillard, ironically the first female prime minister, stripped the word woman from the sex discrimination act. Before then, this case would never have got to court.

Anyone for any toilet

But what this latest decision does (and let’s hope it gets overturned when Sall Grover heads to the High Court), is that women’s sport, toilets, access to medical services, schools, clubs, domestic violence shelters, prisons ∼ the whole box and dice ∼ are open slather to any man who declares he is a woman.

Gender used to be what you called yourself, sex is what XY or XX made you. Not any more, thanks to this decision. And Gillard too, who changed the law just TWO DAYS before she was rolled by Kevin Rudd in June 2013 — how dare she lecture anyone on misogyny.

But on Friday afternoon, the bad news kept coming.

To add Labor insult to Labor injury, dropped out when they hoped no-one was watching was news from the Victorian government that not only was Daniel Andrews going to get a bronze statue in his honour but that it was already being made. You can't make this stuff up, can you?

In memory of stupidity

Given Victoria has a daily interest bill of $24 million, a $130,000 statue is a rounding-error but it’s the attempt to force Victorians to honour the man who locked them up for two years, ruined businesses, blew out debt, kowtowed to China, dialled up woke and made the once-proud state an international laughing stock that’s tipped people over the edge.

Am I the only one asking how the heck did we get here?

And, more to the point, how do we turn it around or, God forbid, is it even possible?

Never trust any leader again

If Albanese is allowed to get away with his massive budget lie, then we will never be able to trust any leader again. And if we can't ask questions before an election and base our decisions on what they tell us and hold them to it, then democracy is dead.

For all of Labor’s talk about intergenerational equity, the budget hits younger Australians the hardest. The PM says breaking his word on negative gearing is about them, but how can it be when they will never be able to use negatively gearing (as he has) to build up a nest egg but those doing it now can keep it up?

Buy a new-build property instead, Labor tells investors. But again, how’s that fair for young people given this is what they typically buy as a first home and, now, they're going to face even more competition as investors move in? Even Labor’s own budget papers admit that these changes will likely increase rents (as they did in the Keating era before he was forced to back down) and do little to increase the stock of available homes.

And then there’s the tax on aspiration (CGT changes) before they get you from the grave (the hit on trusts).

Liberal backbone

Thankfully, the Liberals have finally found a bit of policy backbone, and a bit of political mongrel.

Angus Taylor’s reply to Labor’s budget speech felt like the start of the Coalition getting its mojo back. He made the bold move to end bracket creep once and for all by indexing income tax thresholds, meaning low- and middle-income earners won't get punished for getting ahead. On migration, he went for the jugular and landed a bullseye if the hyperventilating from Labor MPs is any guide. The PM in particular was hysterical, declaring it was un-Australian to divide people between those who are migrant and those who are not.

That is not what Taylor did. He divided them between Australian citizen and non-citizen and said that, under the Coalition, only citizens would get access to the pension, the dole, the NDIS and other welfare.

Help for no commitment

Now what is unfair about that? Why should your taxes carry people who have made no formal commitment to this country? Right now, people can live here for decades, take the money and never pledge loyalty to Australia and its people. Taylor says not any more.

Add in the Treasurer’s announcement of a new Working Australians Tax Offset (a pollster-named handout if ever there was one) of $250 a year (or $4.80 a week) and rightly people are angry. In his budget speech, Jim Chalmers called his WATO meaningful but what’s meaningful about 68 cents a day when the cost of everything has skyrocketed? It’s not meaningful, it’s insulting.

(And I might add, it’s still not even the $275 Albanese promised off their power bills).

Albo's right for a change

Anthony Albanese said that this budget is full of Labor values and it is — the socialist values that attack the fair-go, break trust, and hit middle Australia even harder

For the Liberals, there could be no better ground than this to fight Labor.

If the Coalition holds its nerve and campaigns every day like its life depends on it (because, frankly, it does) then this budget could well be the beginning of the end for the Albanese government.

But only if they work, day and night, to take the fight up to Labor. Labor is the target, not each other and not One Nation.

THUMBS UP

Jacinta Nampijinpa Price: Her emotional, fighting speech in the Senate is a must-watch as she demanded culture takes a back seat to better protect Aboriginal children.

THUMBS DOWN

Military witch hunt: Another $43m in Labor’s budget to investigate soldiers on top of the $350m that the Brereton process has cost taxpayers already.

The Prime Minister’s defence for repudiating assurances he had insistently reiterated ∼ indeed, for the 50th time ∼ is that Australia faces a crisis of intergenerational equity. But as Jonathan Pincus and I demonstrated on these pages, the claim is analytically incoherent and empirically threadbare. Nor, even if there were such inequities, would that justify the abrupt abandonment of repeatedly affirmed undertakings.

Serious governments seek democratic consent for contentious measures they had previously assured voters they would not introduce. John Howard did so with the GST: having ruled it out, he reversed openly, took it to the 1998 election, and proceeded only on the mandate he won there.

Greatest tax take in commonwealth history

The reason the Albanese government has not followed suit is neither urgency nor necessity. It is fear: fear that despite the opposition’s parlous state, voters would punish a government that has spent freely, governed carelessly and is now poised to extract the greatest tax take in commonwealth history.

The budget’s own numbers make the reality plain. Even accepting Treasury’s assumptions, the budget measures will increase housing supply over the next decade by less than one-third of 1%, while housing demand is likely to rise more than 15 times as quickly. This is not serious economic reform. It is a revenue grab wrapped in the language of moral urgency.

Corroding public trust

The inevitable result of that gap between political rhetoric and political practice is to corrode public trust. Trust, after all, is not a natural disposition; it is a social achievement, slowly accumulated and quickly squandered.

The word itself reveals the point. The Old English treow lies behind both truth and trust; since at least the 15th century, to trust someone has meant to believe that when he says what he will do, he speaks truthfully. Governments can sustain trust only by being truthful and trustworthy — and the institutional form through which those virtues manifest themselves is the promise.

A promise is what binds words to conduct, declarations to action, and electoral consent to subsequent government. Governments owe fidelity to their promises not merely for their own political advantage; they owe it because a healthy democratic life depends upon citizens being able to assume and assess fidelity to public commitments.

Governments need to mean what they say

The credibility of promises is also more broadly crucial to the viability of a free society, whose very essence is that people must order their lives amid continual uncertainty. Promises, including the promise that laws will not be changed capriciously, are what give individuals, families and businesses stable ground on which to plan. As Hannah Arendt wisely observed, they build islands of predictability in the ocean of uncertainty — islands that matter most to those with the fewest resources to absorb sudden policy shocks.

A young couple relying on an investment property to finance homeownership, a retiree dependent on hard-earned savings, a small business weighing expansion: all rely on governments meaning what they say.

But promises can only fulfil that stabilising role because they belong to the grammar of commitment: to the forms of obligation whose value lies in their relative insulation from changing convenience. A promise abandoned the moment it becomes burdensome is worth no more than the loyalty that melts away at the first sign of difficulty.

The preservation of credible public commitments is especially vital in Australia, where suspicion of the political process long predates contemporary disenchantment. Distrust of politicians was, as John Hirst emphasised, constitutive of the colonial polity itself. The men who entered politics were not thought fit to be trusted - and despite outstanding exceptions, many weren't.

Pioneering scholars of mass behaviour

The endless Australian debate over the accountability of parliamentarians reflected that suspicion. Both the Burkean trustee ∼ who is guided only by the light of his own judgment ∼ and the instructed delegate had their advocates. But it was the latter conception, entrenched by the emerging Labor Party, that ultimately prevailed. Labor parliamentarians were to be mere instruments: controlled by the ALP’s extra-parliamentary wing, bound by a pledge to uphold the platform and required to submit to caucus discipline on pain of political excommunication.

The Australian mass party thus emerged, from the beginning, as an institutional response to distrust: a mechanism designed less to cultivate confidence in politicians than to contain the risks they posed once elected. And Australian voters learned to scrutinise the distance between promise and performance with an intensity rare in comparable democracies. When that gap widened too far, confidence collapsed.

It is against this background that the events of the past three years must be seen. The Albanese government’s record on the central tax promises of two successive elections ∼ stage three, superannuation, and now negative gearing and the capital gains tax discount ∼ does not just constitute a litany of broken commitments; it constitutes the accelerated dismantling of an already tarnished public asset.

The predictable effect is an even more accelerated crisis of political representation. The four-decade arc from 1975’s 4% third-party vote to 2025’s 34% highlights its seemingly inexorable progression.

Withdrawing faithfulness

Those voters who have spurned the major parties are not ideological partisans of any third force; they are observant citizens who, having grasped what the parties no longer deliver, exercise the only sanction the system leaves them. Unable to meaningfully demand or expect faithfulness to a program from parties whose programs have ceased to bind, they withdraw their own faithfulness from those parties altogether.

The alternatives may not be especially attractive nor particularly unifying — but negative coalitions, aimed at punishing a detested foe, form more easily than positive ones precisely because they require only shared aversion rather than common aspiration. In these conditions, anti-system parties flourish, their capacity to aggregate voters a symptom not of democratic renewal but of democratic exhaustion.

To make things worse, governments confronted by a perpetually seething electorate are naturally tempted to govern through stealth and administrative manoeuvre, further impairing the trust whose disappearance produced the crisis of representation in the first place. And when a real, rather than confected, emergency arrives, they discover they can no longer summon the loyalties and willingness to sacrifice on which the survival of free societies ultimately depends.

Public language becomes tactical

No society can govern itself for long on the assumption that public language is merely tactical. Governments that repeatedly break faith with the electorate may secure temporary advantages. But they do so by undermining the confidence that policies announced today will survive long enough to shape behaviour tomorrow. As that confidence erodes, both the effectiveness of public policy and force of democratic authority unravel.

That is the deeper significance of the Albanese government’s conduct. It is not merely bad policy. It is the depletion of a civic inheritance that free societies squander far more easily than they rebuild. Yes, promises can be cracked like pie crusts. But in the end, public trust cracks with them. Lenin, sheltered by brutal authoritarianism, never had to learn that lesson. With the fabric of our democracy rapidly fraying, it is high time Anthony Albanese did.