“In the initial years compounding tests your patience and in later years, your bewilderment.”
-Anshul Khare
Here’s what you need to know this week:
· Stocks finish the week flat due to turmoil in the Middle East
· The Israeli-Iranian conflict overshadows tariff talks
Volatility Returns
Markets continued their calm climb upwards last week until a new conflict sprung up in the Middle East late Thursday night (more on that in a moment). On Wednesday we received the Consumer Price Index (CPI) report for the month of May; the report showed monthly inflation at 0.1% and annualized inflation at 2.4%, slightly below analysts’ expectations[1]:
This report brings inflation even closer to the Federal Reserve’s stated goal of 2% annualized, raising hopes that we may still get a few interest rate cuts this year. We also received the weekly initial jobless claims report on Thursday morning which reaffirmed the May nonfarm payrolls report in that the US labor market remains strong. One minor troubling detail in the report showed continuing unemployment claims(meaning people who have remained unemployed) has hit the highest number since 2021:
Still, investors took the two reports to show a healthy economy and continued the march toward new all-time highs. That is, until missiles began flying across the Middle East on Thursday night.
The Conflict Expands
As I’m sure you know by now, tensions have flared dramatically between Israel and Iran over the past few days. At 3:30 AM local time, Israel fired a volley of missiles into critical nuclear and military structures in central Iran, hampering many divisions and assassinating key leaders[2]. Israeli Prime Minister Benjamin Netanyahu gave a televised speech shortly after the attacks to announce Operation Rising Lion, an offensive aimed at crippling Iran’s nuclear capabilities. Iranian Supreme Leader Ayatollah Khamenei released a statement shortly afterwards, vowing “severe punishment” for the attacks.
In the days since the initial attacks, both countries have exchanged missiles and have scored direct hits on valuable military targets. Markets reacted instantly to the rapid escalation of attacks with US stocks finishing Friday down more than 1%. However, stocks actually recouped those losses on Monday despite no sign of de-escalation. Certain “risk-off” assets such as gold enjoyed strong gains on Friday, but one particular commodity took center stage: oil.
It is no secret that the Middle East is one of the largest providers of crude oil on the planet. Therefore, it makes sense that a broadening conflict in the Middle East may impact the ability to produce and distribute oil from the region, and Economics 101 tells us that decreasing supply of a product in demand leads to higher prices. This has borne out in the oil markets over the last few days.
In the moments after the first missiles struck, contracts for Brent Crude (the benchmark for oil from the Middle East) rose by more than 10% to $78/barrel, the highest price since early January. West Texas Intermediate (WTI) Crude (benchmark for US oil) experienced a similar spike[4]. Both benchmarks have since retreated but are still above $70/barrel.
The price of oil has wide-ranging economic implications. Crude oil is a key input in many industries and is the main fuel for transporting goods around the world. Many oil byproducts such as gasoline are also a large component of inflation metrics; a one-two punch of higher gasoline and higher transportation costs may fan the flames of inflation right as we are near the finish line of 2% annualized.
This situation is moving fast and this newsletter may be out of date by the time you read it, but as of writing (Tuesday morning) both Israel and Iran continue to exchange blows. Both sides also declined a summit led by the US to discuss offramps to the current conflict. The combination of stocks rising and the price of oil and gold falling this week is an indicator that investors expect a quick resolution, but truthfully there is no way to know for sure. All we know for now is that this conflict has unseated tariffs as the main market driver in the short term.
What Else
· President Trump and other leaders meet at the G7 Summit in Alberta this week
· The US Military held a parade in Washington DC on Saturday to celebrate the 250th birthday of the US Army
· The Senate is preparing to unveil their own draft of President Trump’s tax bill; additional negotiations between the Senate and the House are expected
· A Boeing 787-8 Dreamliner crashed shortly after takeoff in India, leaving only one survivor
· The OKC Thunder play the Indiana Pacers in Game 6 of the NBA Finals tomorrow night at 7:30 PM CT on ABC
What We’re Reading
The Earth was treated to a special lunar display last Tuesday known as the “strawberry moon”. The strawberry moon occurs when a full moon is visible very low on the horizon and gets its name from its signature pinkish hue. This particular moon is quite rare and will not be seen again until 2043; click below to read the history of the strawberry moon in different cultures and see photos of the moon from around the US:
· https://www.nbcnews.com/science/science-news/see-stunning-images-junes-strawberry-moon-rcna212320
What’s Happening Downtown
Bricktown Summer Nights continues this Friday, June 20th. This event is free to attend and features live music, lawn games and food trucks in the heart of Bricktown. This week’s concert is titled “Viva La Bricktown Fiesta” and will feature a variety of performances from local musicians. Click below to learn more:
· https://welcometobricktown.com/bricktown-summer-nights/?mc_cid=a18b685f7e&mc_eid=71bf387036
To read more from our blog, click here
Written by: Kane Ogle, CFP®
Steve Beck, Kane Ogle, CFP®, Amber Eduvigen, CFP®, Cale Olbert, CFP®, Brett Valentine, CFP®, Brandon Ingerson, Jenni Hess
Sources: [1] CNBC [2] Associated Press [3] Sky News [4] MarketWatch