How could global market volatility hit Argentina?

Global market volatility could significantly impact Argentina, following remarks from Federal Reserve Chair Kevin Warsh at the Jackson Hole conference. The Fed chair hinted at the possibility of a rate hike, the first since 2023, at their upcoming meeting on September 15 and 16. Markets are pricing in a 68% chance of a 25 basis point increase during that meeting, according to CME Group’s FedWatch tool.

Meanwhile, global oil prices have surged, driven by renewed tensions between the U.S. and Iran. Brent crude, the global benchmark, climbed above US$91 a barrel, reigniting concerns about inflation impacts.

These factors are putting pressure on global Treasuries, with the 10-year note rising to 4.79%, its highest level since January 2025. The Milei government faces higher borrowing costs in international debt markets if the Fed raises rates, as Argentina’s EMBI+ index now trades above 500 basis points, up from a low of 402 basis points in mid-July. Higher U.S. rates make investing in Treasuries more profitable, weakening Argentine bonds and strengthening the dollar, which makes dollar-denominated debt harder to service.

Economist Gustavo Ber warned that Warsh's hawkish tone presents a "serious challenge" for global fixed income, especially for developing countries like Argentina. Higher oil prices may not indicate a bearish trend entirely, but they do create a more demanding environment for investors. For Latin America, energy exporters such as Argentina could see some support, thanks to record energy surpluses this year.

State-controlled oil company YPF rose over 2% on the U.S. market on Tuesday, while private-sector Pampa Energía also gained.