European Central Bank policymakers, including Peter Kazimir, Christine Lagarde, and Villeroy, emphasized high inflation risks and the potential impact of conflicts such as the Iran war. Despite Kazimir's warning about a possible rate hike, most members stressed caution and patience. They believe negative oil supply shocks slow economic growth and raise inflation, and an early rate hike could trigger a recession. Markets expect about 33 basis points of rate increases by year-end, with a 60% probability of a hike in June, though no short-term decision has been announced.

G7 energy ministers announced support for using strategic reserves to address oil supply disruptions and market volatility after the Iran war began. In a virtual meeting with the IEA, they reviewed the impact of the Iran conflict on energy markets and supply, emphasized coordination with IEA members and international partners, and welcomed proactive measures including tapping strategic reserves.

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.

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.