BlackRock is watching the US inflation data for May, which will be announced on Wednesday, as the first clear sign that may show how the tension between the US and Iran is reflected in the sticky inflation through energy prices. In the company’s weekly market assessment, it was emphasized that the scope of the impact is not yet fully visible and the process depends on the course of the conflict.
All eyes on May CPI data
US consumer price index data will be released on Wednesday at 08:30 ET, equivalent to 15:30 ET. Economists participating in the Reuters survey predict that the annual CPI increase in May will be 4.2%. If this happens, it will exceed the 3.8% level in April and the sharpest annual increase since April 2023 will be recorded.
BlackRock Investment Institute stated that they expect the May US inflation data to show more clearly the impact of the Middle East-based energy shock on already high price pressures, but the full extent of the shock has not yet emerged.
As one of the world’s largest asset management companies, BlackRock is closely watched in its search for direction in global markets. According to the institution’s assessment, the expected acceleration may once again demonstrate that inflation continues to remain significantly above the US Federal Reserve’s 2% target.
Interest rate expectations and possible reflection on the crypto market
The possible rise in inflation may further weaken the interest rate cut expectations priced in at the beginning of the year. This picture may strengthen the view that the Fed’s next step may be an interest rate increase rather than an interest rate cut. High borrowing costs generally limit the appetite for risky assets, including cryptocurrencies.
For this reason, it is considered that a CPI data that may be higher than expected may increase the downward pressure on the crypto market. Bitcoin lost sharp value last week, falling by approximately 14% to below $60,000. Market players are now watching whether both inflation data and related interest rate expectations will lead to new pricing.
Strait of Hormuz emphasis came to the fore
One of the main risks that BlackRock highlighted was the possibility that the Strait of Hormuz would remain closed for a long time, which could extend into July. According to the institution, such a cut could move the energy shock to the center of inflation dynamics. In particular, the possibility of US oil stocks falling to their lowest levels in the last forty years may cause this effect to become more visible.
Mini glossary: The Strait of Hormuz is the narrow passage between the Persian Gulf and the Gulf of Oman, through which the majority of global oil shipments pass. A long-term disruption in this line may accelerate the fluctuation in energy prices and affect inflation expectations.
In the company’s assessment, it was stated that a long-term closure in the Strait of Hormuz, which could extend into July, could make the impact of the shock more evident, and this could be accompanied by a sharp decline in US oil stocks.
For the markets, the data to be announced on Wednesday will be followed closely, not only for the direction of price pressures in the USA, but also for understanding the impact of energy-related risks on monetary policy and crypto assets.
