Week in Review: Oil Prices Soar

The US May consumerprice data surprised on the downside. Headline CPI rose 0.1 % m/m (consensus: 0.3 %) and 2.4 % y/y, while core CPI held steady at 2.8 % y/y. The first full month of new import tariffs had only a marginal impact on coregoods prices. Consequently, market expectations for Federal Reserve policy were little changed.

Brent crude rallied on Friday, settling 7.0 % higher at USD 74.23 per barrel after Israel and Iran exchanged air strikes. Intraday, the benchmark briefly touched USD 78.50, its highest level since 27 January. Although no oil facilities were hit, investors remain sensitive to the risk of further escalation, particularly given Iran’s strategic position near the Strait of Hormuz, through which roughly 20 % of global oil supply transits. Iran’s April output of 3.3 million barrels per day underscores the region’s systemic importance.

On the equities front, US stocks ended the week lower amid escalating tensions in the Middle East. The Dow Jones Industrial Average fell 1.3 % on the week, turning negative yeartodate, while the S&P 500 and Nasdaq Composite retreated more modestly and remain in positive territory.

China’s CPI declined for a fourth consecutive month in May, underscoring weak domestic demand amid the protracted property downturn. Producer prices dropped for a 32nd straight month, marking the steepest fall in almost two years. While the recent tariff détente with the United States has improved the nearterm growth outlook, economists remain cautious on the trajectory of consumer prices.

Market Moves of the Week

Looking ahead, upcoming consumer inflation and retail sales data, due next week, may provide further insight into the SARB’s policy stance, although the next interest rate decision is scheduled for late July.

Chart of the Week:

Credits: Strategiq