Highlights
On a quiet day for scheduled news, oil prices and bond yields are up as the re-escalation of military conflict in the Middle East and uncertainty over energy flows through the Strait of Hormuz come back into focus. Markets have raised somewhat their expectations for the Federal Reserve to raise rates this year -- though not in July. More now see a 25 basis point rate increase in September or October and a second move early in 2027.
Lots of attention on US consumer price figures due on Tuesday and producer prices on Wednesday. Note that these numbers will be for June when oil prices fell back from their May highs. Now that the ambiguous US-Iran Memorandum of Understanding has fallen apart in July, energy prices are headed the other way.
At House hearings on Tuesday and on the Senate side on Wednesday, Fed Chair Kevin Warsh will no doubt be pressed to describe how this will affect the outlook for policy, and he could be forgiven for saying the situation is too fluid to comment. On the other hand, Warsh has made clear that he does not want to signal his policy views to the markets; he prefers that investors look at the same information he is looking at and draw their own conclusions. Another uptick in inflation flowing from President Trump's handling of foreign policy and the economy will be hard to ignore.