Mid-Month Update
Headlines & Highlights
- Iran War flares up again: Active warfare resumed in the Persian Gulf region in early July after Iranian forces attacked three commercial ships in the Strait of Hormuz, saying the vessels did not have permission to pass through the strait. The U.S. responded with strikes intended to degrade Iran’s ability to menace ships seeking to transit the gulf, and President Trump declared that the ceasefire dating back to early April was “over.” The price of oil quickly reversed a weeks-long downward trend – Brent crude, the global benchmark, jumped from $72 to $85 per barrel in less than a week.
- June CPI falls on cheaper energy: After three straight months of rising prices, the inflation rate fell off sharply in June, with the effects of a 20+% drop in the price of crude oil being the key driver. The Consumer Price Index (CPI) came in at an annual rate of 3.5%, down from 4.2% in May, the federal Bureau of Labor Statistics reported. Less costly oil contributed to an average 11% decline in gasoline prices nationwide in June. The 12-month rate for “core” inflation, which excludes volatile food and energy, was 2.6% in June, down from 2.9% a month earlier.
- Stocks flat on war uncertainties: Fighting in the Middle East and a resulting rise in energy prices took a little air out of markets in the first half of July. The iShares ETF for the S&P 500 started the month in a brisk uptrend before slipping as military activity intensified – still, it was up 1% at mid-month (+9.5% year to date). International markets more dependent on imported oil have felt more impact – since July 6, when Iran fired on the three cargo ships, the ETF for emerging markets is down about 3% (+20% YTD) and the developed-markets ETF is down around 1% (+11% YTD).
Chart of Interest
Key Takeaways
- Along with declaring the April ceasefire over, President Trump said that he no longer wants to negotiate with Iran to try to reach a lasting peace deal. Other U.S. officials, however, have told media outlets that discussions are continuing through mediators, which suggests that both sides have not given up on a non-military resolution to the conflict.
- While June’s drop in inflation was certainly welcome news for hard-pressed U.S. consumers, the respite may only be temporary given the big upswing in oil prices since the fighting resumed in the Persian Gulf region. After dropping in June, AAA said the price of a gallon of regular gasoline climbed from $3.79 to almost $3.90 in the week after the flareup.
- Any hopes that the lower inflation reading in June might spur a movement toward interest-rate cuts may have been dashed, or at least delayed, by this month’s oil-price spike. Testifying before the Senate on July 15, new Federal Reserve Chairman Kevin Warsh reiterated his commitment to getting inflation back down to the Fed’s 2% annual target rate.
- Second-quarter earnings season got off to a banging start, with the nation’s largest banks reporting revenue and profits that significantly exceeded already lofty expectations. Data firm FactSet estimates that S&P 500 earnings will grow close to 30% compared to the same quarter in 2025. Earnings growth has been a powerful market driver this year.
- Job creation in June fell off relative to the previous few months – the initial measure by the Bureau of Labor Statistics showed that 57,000 new positions were added nationally, about half of economists’ expectations. But through the first six months of the year, 2026 is averaging 92,000 new jobs being created each month, nearly a sevenfold increase over the full year of 2025.
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The material shown is for informational purposes only. Past performance is not indicative of future performance, and all investments are subject to the risk of loss. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties and actual results may differ materially from those anticipated in forward-looking statements. As a practical matter, no entity is able to accurately and consistently predict future market activities. Information herein incorporates Altair Advisers’ opinions as of the date of this publication, is subject to change without notice, and should not be considered as a solicitation to buy or sell any security. While efforts are made to ensure information contained herein is accurate, Altair Advisers cannot guarantee the accuracy of all such information presented. Material contained in this publication should not be construed as accounting, legal, or tax advice. See Altair Advisers’ Form ADV Part 2A and Form CRS at https://altairadvisers.com/disclosures/ for additional information about Altair Advisers’ business practices and conflicts identified. All registered investment advisers are subject to the same fiduciary duty as Altair Advisers.