Three forces are dominating markets right now: sticky US inflation, a Fed signaling hawkishness without committing, and a fast-collapsing Middle East risk premium reshaping oil and rate expectations all at once.
On inflation, the published research consensus sees US core PCE holding at 3.4% in May — well above the Fed's 2% target and a real constraint on near-term rate cuts. Analysts point to a stack of drivers: AI capex, tariffs, deglobalization, and the lagged hit from the recent energy shock. Yet most researchers argue the bar for actual hikes this year stays high, with falling oil expected to cool headline prints. New Fed Chair Warsh's July 1 remarks are flagged as the next big tell.
On oil, WTI is back below $70 as the Strait of Hormuz reopens and a US–Iran ceasefire holds. One camp views the geopolitical premium as fully unwound; a more cautious thread warns only 30–40% of disrupted supply normalizes within weeks, leaving prices ~$10 above pre-conflict levels.
A contrarian view even argues up to three Fed hikes could be warranted before year-end.