Curb your enthusiasm

Energy-driven inflation and record-low consumer sentiment are colliding with strong investor risk appetite, creating a fragile backdrop for portfolios. The Iran conflict has pushed oil and gasoline prices sharply higher, lifting headline CPI and pressuring growth expectations, even as core inflation remains only slightly above recent lows. Markets are looking past these near-term shocks, with equities recovering most of their wartime losses, bond yields easing off recent highs, and volatility retracing its spike.

The Fed is likely to stay on hold as it balances solid labor data against what it views as a temporary inflation surge tied to geopolitics. Much now hinges on ceasefire negotiations and the future of the Strait of Hormuz; any breakdown could reignite energy price spikes and test today’s optimistic positioning across risk assets.