Hot CPI and PPI Force Fed Rate Cuts Much Further Out as Iran War Shocks Energy

Overnight, Asia and Europe digested a brutal inflationThe rate at which prices rise across an economy. shock. The May 13 US data dump showed wholesale prices accelerating to their fastest pace since 2022, driven squarely by energy costs spiraling from the Iran conflict. The Strait of Hormuz oil flows collapsed nearly 30% in Q1 2026 to 6 million barrels per day, marking the lowest levels since the 1990s. Saudi Arabia's crude output hit its lowest since 1990 as tanker diversions strain logistics. This wasn't a transient energy blip: it's a structural supply crisis reshaping global inflation expectations. 10-year Treasury yields broke above 5% for the first time since July, and the 30-year long bond crossed 5% for the first time since 2007. Bond markets repriced decisively lower across the curve, wiping out nascent Fed pivot trades. The dollar index strengthened on rate expectations, while gold (XAU) and crude (both WTI and Brent) spiked further. European bourses faced headwinds: stagflation fears gripped DAX, CAC, and STOXX 50E as the Iran war threatens their energy supply chains and supply chain volatility hit its highest since the 2022 crisis.

US stock index futures are under pressure heading into the cash open. The repricing of Fed policy expectations has hit tech and growth names especially hard given their sensitivity to durationBond price sensitivity to interest rate changes.. NVDA, TSLA, AVGO and other momentumThe empirical fact that winners keep winning over the medium term. names saw premarket selling. However, there is a tactical undercurrent: Trump's Beijing summit with NVIDIA CEO Jensen Huang, Tesla chief, and Apple executives on China trade and AI chip access has injected a bid into tech on hopes for tariff relief. Energy names, meanwhile, are bid on higher WTI and Brent prices. The VIXThe 30-day implied volatility of S&P 500 options. The 'fear gauge.' remains elevated, reflecting elevated macro uncertainty. SPX and NDX futures are lower in premarket trade; RUT weakness has been more muted given small-cap resilience on domestic inflationThe rate at which prices rise across an economy. pass-through.

The macro calendar today is light relative to the shock already delivered. No major Fed speakers or Treasury auctions are scheduled; focus remains on overnight Asia CPI readings and any central bank commentary on rate path adjustments. Oil inventory data and Strait of Hormuz flow updates will be watched for evidence of further supply tightening. Energy markets are priced for sustained scarcity: WTI near session highs, Brent holding firm, natural gas (NG=F) elevated on cooling demand destruction trades.

Earnings season is winding; no major blockbuster names report at the open today, though energy and materials firms saw upgrades on crude price dislocation. Ford (F) shares soared on a Morgan Stanley call highlighting its energy storage unit, a rare bright spot in the premarket tape. Energy infrastructure and renewable plays like Fervo Energy (which IPOInitial Public Offering - a company's first public sale of stock.'d yesterday and popped 33%) are seeing rotation interest as the Iran war reframes the energy investment thesis for years ahead.

Cross-asset setup: DXYThe US Dollar Index — trade-weighted USD against EUR, JPY, GBP, CAD, SEK, CHF. (US dollar index) continues higher on rate repricing; EURUSD and AUDUSD weakened as commodity currencies suffer from global growth fears. Crypto had a tactical relief bid overnight (BTC, ETH-USD stabilized), but XRP and SOL (altcoin ETFExchange-Traded Fund - a basket of securities trading like a single stock. inflows) are rotating as traders hunt yield in smaller-cap assets. The yen (USDJPY) is bid on carryIncome earned from holding a position over time. unwind fears. Gold (GC) is near session highs on inflationThe rate at which prices rise across an economy. and geopolitical risk.

The desk enters the session cautious but structured. The inflationThe rate at which prices rise across an economy. shock is real; Fed rate-cut odds have been pushed into late Q3 at the earliest. Energy is now a structural tail risk for central bank policy, not a transient shock. Tech is under durationBond price sensitivity to interest rate changes. pressure but has a tactical bid on China trade hopes. Energy and materials benefit from oil price dislocation. Levels to watch: SPX 5,900 support, NDX breakdown below key technical levels, 10-year Treasury yield holding above 5%, WTI crude holding above $90. The bias into the open is mixed: growth selloff on rates, value/energy bid on oil, tech up-and-down on rate/China trade crosscurrents. Volatility is here to stay.