WS #12098

The US-Iran conflict remains the dominant macro theme, with active hostilities escalating. Iran and US forces exchanged fire in the Strait of Hormuz, with reports of explosions in Bandar Abbas and other coastal cities. CENTCOM confirmed strikes on Iranian coastal defense systems and a naval blockade. However, a key de-escalation signal emerged: Trump abandoned the proposed 20% Strait of Hormuz transit fee, replacing it with trade/investment deals with Gulf states. This counter-signal dampens the oil supply crisis narrative. Separately, US June CPI came in at 3.5% YoY (vs 3.8% expected), the first negative monthly print since 2020, driven by falling energy prices. This sharply reduced Fed rate hike expectations for July (from 42% to 17%) and boosted risk assets. However, oil prices are rising again due to renewed Iran hostilities, threatening to reverse the CPI-driven relief. China June new home prices data showed continued weakness, with national prices -3.3% YoY, though the pace of decline moderated slightly. This is a negative for China-exposed commodities and EM equities. The IBM earnings miss (from prior window) continues to weigh on tech sentiment, but the CPI data and AI-related positive signals (NVIDIA, Apple iOS 27 beta with Siri AI) provide counterbalance. The dominant narrative is ESCALATING for Iran conflict, but with a de-escalation counter-signal on Hormuz tolls. The CPI data is a high-significance positive for risk assets, but oil price resurgence is a key risk to watch.