Finance

Executive summary

A geopolitically driven energy shock has lifted US inflation to 3.8% and pushed the Federal Reserve toward a tightening bias, with markets now pricing a non-trivial chance of a 2026 hike. Simultaneously, structural fragilities in the US Treasury market—more price‑sensitive holders, a fading convenience yield, and heavy near‑term rollover—raise the risk that modest rate moves translate into outsized volatility. US equities have surged on AI enthusiasm even as valuation metrics (CAPE ~41) approach dot‑com territory, elevating correction risk if discount rates rise. In Europe, the ECB is constraining euro‑stablecoin growth and ordering faster AI‑centric cyber hardening, signaling a materially tougher operating environment for EU banks and fintechs.