Inflation Grinch Dampens Santa Rally as Oil and Geopolitics Bite

Reuters Morning Bid, written by global markets correspondent Naomi Rovnick from London, frames inflation as an "Inflation Grinch" haunting the customary Santa rally on Wall Street. The column highlights three intertwined market drivers that are weighing on risk appetite as the year closes. First, persistent inflation concerns remain at the forefront of investor thinking. Second, a still robust U.S. jobs backdrop reinforces fears that inflation pressures will not quickly abate and that central banks may be slower to ease policy. Third, renewed geopolitical risk is pushing oil prices higher, creating additional upside pressure on inflation expectations.

The Morning Bid piece points to a rally in Brent crude and connects that move to a contentious U.S. policy step. Reuters reports that Brent crude is rallying after U.S. President Donald Trump on Tuesday ordered a "blockade" of sanctioned tankers leaving and entering Venezuela. That policy action is presented as both a supply side shock and a sentiment shock for markets, coming at a time when demand concerns remain part of the macro equation.

Taken together, these forces are blunting the typical year end rebound investors expect. Market participants often look to December for window dressing and tax related positioning that can lift equity indices. This year, however, the combination of sustained inflation worries and higher oil creates a tougher backdrop for cyclical and growth sensitive assets. The Morning Bid commentary notes that elevated rate expectations, fed by resilient employment conditions, make risky assets more vulnerable to revised discount rates and earnings forecasts.

Related Reuters coverage underscores the broader policy backdrop. A separate Reuters item notes that recent Federal Reserve liquidity measures have calmed year end funding jitters, illustrating that central bank operations can alleviate short term stress in funding markets even as monetary policy itself remains a key variable for longer term returns. The Morning Bid sits alongside visual coverage including a photograph of a Wall Street entrance credited to REUTERS slash Kylie Cooper dated April 7, 2025, and an invitation for readers to sign up for Reuters Breakingviews analysis and other services.

For investors, the implications are practical. Higher oil risks complicate the path to lower headline inflation and can translate into sector specific rotations toward energy and away from interest rate sensitive assets. For policymakers, resilient labor markets combined with supply driven price moves increase the difficulty of reconciling inflation mandates with financial stability concerns. Looking ahead, the balance between persistent demand side strength and episodic supply shocks will determine whether markets can regain typical year end momentum or whether volatility will remain elevated into the new year.

The Morning Bid commentary does not provide specific numerical readings for inflation, jobs or the precise magnitude of Brent moves, but its framing underscores a market mood in which policy uncertainty and geopolitical developments are central to asset allocation decisions as 2025 draws to a close.