Geopolitical Deal Sparks Rally
Global equities surged following a tentative U.S. and Iran ceasefire to reopen the Strait of Hormuz. Optimism lifted Wall Street’s S&P 500 by 1.7 percent to 7,554.29, while the Nasdaq jumped 3.1 percent. In Asia, Japan’s Nikkei 225 spiked 5 percent to hit a record high, and South Korea’s Kospi leaped 5.2 percent as geopolitical premium dissolved.
Crude Oil Prices Plunge
Energy futures slid heavily as Middle East tensions eased. Brent crude oil dropped 4.8 percent to 83.17 dollars per barrel, effectively retracing to early March levels. The immediate threat of supply chain disruptions subsided as traders priced in stable Iranian exports, though prices remain well above the prewar average of roughly 70 dollars.
Inflation Hits Three-Year Peak
U.S. consumer prices for May accelerated to 4.2 percent year over year, marking a three year high. The surge was driven by a 23 percent annual spike in energy costs. Conversely, core inflation moderated to 2.8 percent, while the annual producer price index climbed to 6.5 percent, its fastest factory gate pace since late 2022.
Shift in Rate Expectations
Persistent inflation combined with the geopolitical truce triggered a dramatic recalibration of global monetary policy. The Federal Reserve held its benchmark steady at 3.50 percent to 3.75 percent. CME FedWatch data showed 2026 rate hike probabilities falling to 57 percent from 71 percent last week, while the European Central Bank raised rates.
