Despite the rally, risks remain elevated. US-Iran tensions have not de-escalated, and any further strikes or escalation near the Strait of Hormuz could quickly reverse the positive sentiment. The naval blockade continues to disrupt shipping and raise energy price uncertainty, a factor that could feed into future inflation readings. Market participants will now turn to the Federal Reserve's next policy meeting for confirmation of a less hawkish stance, with the CPI data providing room for a more patient approach. For now, the inflation print has taken center stage, but the geopolitical backdrop remains a wild card that could test the durability of the rebound.
What to Watch
- Federal Reserve's next policy meeting for guidance on rate path
- US-Iran tensions and potential escalation near the Strait of Hormuz
- Upcoming inflation data to confirm the disinflation trend
- Capital flows into emerging markets and speculative assets
Sources: Source 1
