Summary
Highlights
Investors should track tanker traffic through the Strait of Hormuz, the potential collapse of the mid-August ceasefire window, and upcoming Fed commentary to assess the persistence of these energy-driven inflationary pressures.
Recent US strikes on Iranian infrastructure in the Hormozgan province have triggered retaliation, leading to a significant naval blockade near the Strait of Hormuz and causing severe disruptions in oil shipping.
The recent positive CPI data was heavily supported by cheap oil resulting from a now-collapsed US/Iran ceasefire. The restart of hostilities has caused oil prices to surge, undermining the fragile disinflation trend.
The Fed is now facing a conflict between positive internal inflation metrics and external geopolitical supply shocks. This creates uncertainty regarding future interest rate hikes and complicates the Fed's goal of a 'soft landing'.