NEW YORK/LONDON, Aug 26 (Reuters) – Stock markets around the world fell slightly on Monday as investors digested the likelihood of an imminent U.S. interest rate cut, while oil prices jumped amid rising tensions in the Middle East.

The stock market is “processing a lot of news: Obviously there was a rally on Friday on comments from (Federal Reserve Chairman Jerome) Powell and we thought durable goods orders were doing well,” said Ben McMillan, director and chief investment officer at IDX Insights in Tampa, Florida.

“Historically, interest rate cuts have actually preceded equity market weakness because there is a reason why interest rate cuts occur.”

“The big theme this week is actually Nvidia, more than any other macro theme. I think people are really focused on Nvidia because that’s been kind of the indicator of risk-on deals this year,” McMillan added.

Brent crude oil futures closed 3.05% higher at $81.43 a barrel, while US crude oil futures closed 3.5% higher at $77.42 a barrel.

The yield on 10-year US benchmark bonds rose 1.3 basis points to 3.82 percent. The yield on 2-year bonds, which usually moves in line with interest rate expectations, rose 2.7 basis points to 3.94 percent.

Fed funds futures are fully priced in for a quarter-percentage point cut at the Sept. 18 meeting and imply a 39.5 percent chance of a 50 basis point move. The market has also priced in 103 basis points of easing this year and another 122 basis points in 2025.

The ECB has already started cutting interest rates: in July there was a reduction of 25 basis points, and further reductions of two quarter points are priced in by the end of the year.

“I think it’s more likely that we’ll see a 75 basis point cut this year. And the market may be bracing for smaller rate cuts than are currently priced in,” McMillan said.

Dollar index rises, gold companies

US personal consumption and core inflation data will be released on Friday, along with a preliminary estimate of inflation in the European Union. Most analysts expect the data to enable interest rate cuts in September.

The Japanese yen rose to a three-week high against the US dollar. The dollar fell to 143.45 yen, but was able to make up for its losses and was recently slightly higher at 144.56 (0.14 percent).

The dollar index, which measures the greenback against a basket of currencies including the yen and euro, rose 0.24 percent to 100.84, while the euro fell 0.28 percent to 1.1159 dollars.

Gold prices rose, approaching recent record highs on safe-haven demand. Spot gold gained 0.31% to $2,518.27 an ounce. US gold futures rose 0.28% to $2,515.50 an ounce.

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Chibuike reports breaking news with a focus on finance and markets. He previously covered U.S. private equity firms and holds master’s degrees in journalism from New York University and Edinburgh Napier University.