Ayatollah Mojtaba Khamenei released his first official statement, largely repeating the positions of the previous leader. He emphasized the need to keep the Strait of Hormuz closed, describing it as a key leverage point. He also stated that the enemy must compensate for the damage inflicted; otherwise, Iran would retaliate by targeting their assets in the region. There are no signs of a potential agreement, and references to the Strait of Hormuz pushed oil prices up by about $2.

The PCE price index will be released today, with markets expecting the core reading to rise 0.4%. Despite the recent softness in Consumer Price Index (CPI) data, economists anticipate that the Personal Consumption Expenditures (PCE) price index the Federal Reserve’s preferred inflation gauge will show stronger price pressures. While core CPI usually runs above PCE, the faster growth in PCE has created an unusual gap between the two measures, with core PCE expected to reach around 3.1%. Meanwhile, rising oil prices amid the Iran war are increasing the risk of higher inflation in the coming months, potentially complicating the Federal Reserve’s path toward interest-rate cuts as higher energy, transportation, and food costs add fresh inflationary pressures.

According to a Bloomberg survey, many economists expect the European Central Bank to keep interest rates unchanged at least until 2027, while markets continue to price in the possibility of rate hikes this year. The disagreement largely stems from uncertainty about the duration of the Iran war and its impact on energy prices and inflation. Policymakers led by Christine Lagarde remain alert to the risk of another inflation shock following the surge in energy costs but prefer to wait and assess the real economic impact of the conflict and potential disruptions in the Strait of Hormuz. Most economists still believe that if inflation intensifies again, the ECB’s next move would more likely be a rate hike rather than a cut.

As oil price volatility eased, selling pressure in global equity markets slightly moderated, though concerns over an escalation of the Iran war continue to weigh on sentiment. The MSCI All Country World Index fell about 0.3%, while Brent crude traded around $100 per barrel after a sharp rally the previous day. Investors are also assessing measures taken by the administration of Donald Trump to curb energy prices, including the release of strategic reserves and a temporary waiver allowing purchases of Russian oil. However, Iran’s threat to keep the Strait of Hormuz closed has heightened fears of global supply disruptions, prompting markets to remain cautious about inflation risks and the future policy path of the Federal Reserve.