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- The Strait Is Closed. The Window for Rate Cuts Might Be Too
The Strait Is Closed. The Window for Rate Cuts Might Be Too
Iran’s move on Hormuz and the Fed’s messaging could reshape inflation bets and asset flows
Christopher Martinez
June 22nd, 2025 • ⏱ Reading Time: 5 minutes
Table of Contents
🗓️ Upcoming Economic Events
Monday, June 23, 9:45 a.m
Flash Services PMI
Flash Services PMI is a preliminary gauge of service-sector activity, showing how businesses are performing based on output, new orders, and prices—often used as an early signal for economic momentum.
Flash Manufacturing PMI
Flash Manufacturing PMI is a preliminary snapshot of factory activity, measuring production, new orders, employment, and supply chains—offering an early read on industrial strength or slowdown before official data.
Thursday, June 26, 8:30 a.m
Final GDP q/q
Final GDP q/q measures the quarter-over-quarter change in a country’s total economic output, adjusted for inflation—it’s the most complete estimate of growth and reflects how fast (or slow) the economy actually expanded.
Unemployment Claims
Unemployment claims track the number of people filing for jobless benefits for the first time each week, serving as a real-time indicator of labor market health and potential economic stress.
Friday, June 27, 8:30 a.m
Core PCE Price Index m/m
The Core PCE Price Index m/m measures the monthly change in consumer prices excluding food and energy, and is the Fed’s preferred gauge of underlying inflation trends.
The Fed’s Rate Decision
Fed Holds. Tariffs Blur the Map. Here’s What It Means for Markets.
The Federal Reserve just held interest rates steady at 4.25%–4.5%. But the real story is what’s happening behind the pause—and how it may shape price action this summer.
Key Signals You Need to Know
🛃 Tariffs = Wildcard Risk
The Fed sees new tariffs raising prices temporarily. Powell said businesses expect to pass costs to consumers—but no one knows how much or how long it’ll last.
📈 Inflation: Not Out of the Woods
Core CPI: 2.3%
Short-term inflation expectations: rising
Long-term: still anchored (for now)
🧊 Economy: Not Hot, Not Cold
Growth: Slowing on paper (due to trade distortion), but private demand is still firm
Labor: Steady. Unemployment at 4.2%, wages outpacing inflation = real income gains
Fed forecast: GDP to rise just 1.4% in 2025
💬 Powell’s Message (Decoded)
“We’re not cutting because inflation could still rise short-term—and we need to see how tariffs actually hit the data.”
How The Most Recent Economic Data Effects Assets in the Short-Term
Trump’s Attack on Iran
Geopolitical tensions surged today after former President Donald Trump authorized a precision military strike on Iranian military infrastructure, escalating an already fragile situation in the Middle East. In response, Iran closed the Strait of Hormuz, one of the world’s most critical oil transit chokepoints—through which over 20% of global petroleum passes.
The move sent immediate shockwaves through global markets:
Oil prices surged on fears of supply disruption.
Safe haven assets, including gold and the dollar, rallied as investors braced for broader conflict.
Risk assets slid across Equitity futures, with energy-sensitive sectors whipsawed by volatility.
This marks a dangerous turning point, with potential knock-on effects for inflation, global trade, and Fed policy. Markets will now price in not just energy risk, but macro and military escalation risk—which could shift capital away from risk assets and toward commodities or defensive sectors.
Quoting from last week’s newsletter:
“An attack on Iran could push oil to $120 and drive U.S. CPI up 5%,”
said J.P. Morgan’s Natasha Kaneva.
⛽ Key Watchpoint: If the Strait remains closed for days or weeks, oil could spike above $100/barrel—and that could reignite the inflation narrative, challenging central banks worldwide.
Word of The Day
Glossary
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Did You Know? War has historically been one of the fastest ways to devalue a currency. During WWI, major powers like Germany and Austria-Hungary abandoned the gold standard to print money for military spending—causing their currencies to collapse in value within just a few years.
Till next time,