Fed Rate Hike Odds Hold Near 17% as Brent Crude Tops $106

Oil jumps on a Gulf escalation

Crude prices climbed again on Monday, October 12. A deadly Houthi strike on Saudi Arabia's capital outweighed signs that more Russian energy supply is on the way. Brent, the international benchmark, settled up 1.8% at $106.65 a barrel. US West Texas Intermediate rose 2% to $93.74 12. That Brent close was the highest since September 15 2.

The trigger was a Saturday attack by Iran-backed Houthi militants on King Khalid International Airport in Riyadh. Casualty counts differ slightly. One report puts the death toll at 12, another at 13, and both agree more than 300 people were wounded 12. The violence has continued since. The Saudi-led coalition said early Monday it was responding to a new wave of drone and missile attacks 1, and further strikes were reported on Sunday 2. Analyst Louis Navellier said the airport attack would "obviously escalate the retaliation" against the Houthis in Yemen. He noted that Saudi refineries are currently running but that five had been shut temporarily at one point 2.

The rally came even though Washington was promoting news that should have weighed on prices. President Trump hailed new Russian diesel exports and an energy-focused Russia-Ukraine ceasefire, and the prospect of more Russian supply reaching markets has grown 12. That ceasefire is already in doubt. Ukrainian President Volodymyr Zelenskyy said Monday that Russia had violated it by continuing to strike Ukrainian energy facilities 1. Traders are treating new supply risk in the Gulf as more urgent than possible new supply from Russia.

The Fed puzzle: oil up, hike odds down

The more surprising part of the story is in rate markets. With Brent above $106, you might expect traders to bet on another Fed tightening. They have mostly not done so.

The Fed's target range is 3.75%–4.00% after a 25-basis-point hike in September, which followed five straight holds earlier in 2026 3. Pricing for the October 27–28 meeting swung sharply in the weeks before the latest oil spike. Odds of an October hike were near 69%, averaged across Kalshi and Polymarket, just before New York Fed President John Williams said on September 29 that there was no urgency to move again so soon 4. By October 7, Kalshi priced a 25bp hike at only 16.5%, with a hold at 82.5% 4.

As of October 10, a hold was still the clear favorite. One tracker showed hold probabilities of 84.5% on Kalshi, 83.5% on Polymarket and 82% in futures. A separate Kalshi breakdown put hike odds at about 18% (17% for 25bp, 1% for 50bp) and a hold at 81% 3. The same tracker notes that the market favorite has correctly called 14 of 14 Fed decisions since 2025 3. Further out, prediction markets still lean toward hikes at December and subsequent meetings 3. So the market has delayed its tightening expectations rather than dropped them.

This does not mean traders consider oil irrelevant. Market commentary flagged that a sustained move into the $105–$110 range could turn the October decision from a "hawkish hold" back toward a second hike 5. Brent's settle at $106.65 is now inside that band, so the threshold is being tested now.

Crypto and bonds feel the pressure

The oil shock is also affecting other assets. Bitcoin has stayed under pressure near $83,000 as the Houthi attacks escalated and Trump signaled possible US military involvement 5. In the UK, gilt yields climbed to 19-year highs on the same oil-driven inflation worries 5. Together these moves fit a familiar pattern. An energy supply shock raises inflation expectations, which raises the risk of tighter-for-longer policy, which hurts speculative assets like crypto 5.

Reading the signals

The gap between $106 oil and hike odds in the high teens seems to come down to how much weight markets give Fed communication versus commodity prices. Williams' comments clearly changed expectations, and the market has not abandoned his message after one weekend of geopolitical shock. Central bankers also typically look past energy spikes they consider temporary. Traders appear to be betting the Fed will do the same unless the spike persists or spreads into broader inflation.

The position looks fragile, though. Hike odds held in the 16.5%–18% range while Brent was moving into the danger zone traders had identified 345. Further Houthi strikes on Saudi infrastructure, or a collapse of the Russia-Ukraine energy truce, could push crude higher at a time when hike odds are already low. If that happens, a sharp repricing in rate markets would likely follow, along with more pressure on bitcoin. For now, the market's view is that the Fed holds in October and leaves tightening for later.