Rising UK Inflation Meets Fragile Geopolitics
Markets navigated a mix of stronger-than-expected UK inflation data and ongoing geopolitical tensions, keeping sentiment cautious despite short-term relief in risk assets.
In the UK, inflation signals remained firm. PPI Input Prices MoM surged 4.4%, sharply above the 3% forecast and up from 0.8% previously, pointing to renewed cost pressures in the production pipeline. Meanwhile, CPI YoY held at 3.3%, in line with expectations but higher than the prior 3.0%, while Core CPI eased slightly to 3.1% from 3.2%, suggesting only modest progress on underlying inflation. Overall, the data reinforces a “higher-for-longer” narrative for UK rates.
Geopolitics remained the dominant macro driver. Reports indicated Iran received signals that the US may be willing to ease the blockade, although rhetoric from Iran’s Revolutionary Guards stayed aggressive, emphasizing readiness for confrontation and vigilance during what they described as a “silent battlefield.” At the same time, a container vessel near Oman was fired upon by an IRGC gunboat, highlighting that tensions in the Strait of Hormuz remain unresolved despite diplomatic headlines.
On the US side, Donald Trump’s announcement of an extended ceasefire with Iran provided temporary relief to markets. US equity futures rebounded, with S&P 500 contracts up 0.5% and Nasdaq 100 futures gaining 0.6%, as investors priced in lower risks to oil supply and global growth. However, the underlying tone remains cautious, as previous sessions saw declines driven by uncertainty around the durability of the ceasefire.
In commodities, Brent crude hovered around $98 per barrel, reflecting a balance between easing escalation fears and persistent supply risks tied to the Hormuz chokepoint. Any disruption in this region continues to carry outsized implications for global energy markets.
Asian equities weakened, with the MSCI Asia Pacific Index falling 0.7%, tracking US losses from earlier sessions. European markets were also expected to open lower, reflecting lingering uncertainty across global risk sentiment.
Elsewhere, geopolitical risks extended beyond the Middle East, as Russian drone strikes targeted Ukraine’s Odesa port infrastructure, while Iran reportedly seized two vessels in regional waters, further complicating maritime security.
On the corporate front, Apple announced John Ternus as its next CEO, marking a significant leadership transition for the tech giant. Additionally, Japan signaled plans to import 1 million barrels of crude oil from Mexico, highlighting ongoing shifts in global energy flows.
By Amir Amidian
Senior Market Analyst | Zylosta
