Key insights
- US CPI data met expectations, easing fears of an immediate Fed rate hike. However, escalating Middle East tensions and potential oil supply disruptions quickly overshadowed the inflation report. This geopolitical risk shift led to a sell-off in US stocks, particularly tech and semiconductors, while energy shares rose. The upcoming Fed meeting now faces a more complex outlook due to higher oil prices and ongoing geopolitical uncertainty, suggesting continued market volatility.
For now, it feels like inflation passed the test, but geopolitics became the main risk again. The big story today is that inflation wasn’t the problem.... the Middle East was.
US CPI came in pretty much as expected. Inflation is still well above the Fed’s 2% target, but the report wasn’t hot enough to trigger fears of another rate hike. For a few hours, that gave markets some relief.
Then Trump followed through on his threats and launched another round of strikes against Iran.
That immediately shifted the focus back to geopolitics. Oil jumped again, with Brent moving back toward $95, and investors started worrying about supply disruptions through the Strait of Hormuz. The market’s reaction says it all: good inflation data got overshadowed by fears of a wider conflict.
US stocks had another rough session, especially tech and semis. AI-related names continued to sell off, while energy stocks benefited from the surge in oil prices. The upcoming SpaceX IPO is also attracting massive investor demand, which may be pulling capital away from other markets.
The next key event is next week’s Fed meeting. The CPI probably removes the risk of an imminent rate hike, but the combination of higher oil prices and ongoing military escalation makes the outlook much more complicated.
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