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Six Hours Between the Ceasefire and the Strike Order
At 11:15 a.m. ET Tuesday, Brent crude had fallen to $89.61, its lowest level in seven weeks. Iran and Israel had agreed to halt strikes against each other. President Trump said both sides were seeking an “immediate ceasefire.” The Strait of Hormuz, closed since late February under a dual U.S.-Iranian blockade, appeared one step closer to reopening. Oil traders sold. The S&P 500 rose as much as 0.63% in the first hour.
At 1:43 p.m., Trump posted on Truth Social that Iran had shot down a U.S. Army Apache helicopter over the Strait of Hormuz on Monday. Both pilots were rescued by an unmanned sea drone. “The United States must, of necessity, respond to this attack,” he wrote. Brent reversed. The Nasdaq, which had been up nearly 0.7%, closed down 0.97%. The S&P finished at 7,386.65, giving back all of its early gains and then some.
At 5 p.m. ET, CENTCOM acted. U.S. Air Force and Navy fighter jets struck Iranian air defense systems, ground control stations, and surveillance radar near the Strait. Targets spanned Qeshm Island, Jask, Sirik, and Bandar Abbas. CENTCOM called it a “proportional response to unjustified Iranian aggression.” The strikes were completed by approximately 9 p.m. ET. Within hours, Iran launched retaliatory missiles and drones at Bahrain and Kuwait.
The equity market closed before CENTCOM fired. That means Tuesday’s final prices reflect none of the overnight escalation. The 10-year Treasury, which held at 4.54–4.57% all day despite the ceasefire-driven oil decline, was already telling you that the bond market did not believe the de-escalation would hold. For the fourth consecutive session since Friday’s jobs report, yields refused to fall.
Now add the CPI. At 8:30 this morning, the Bureau of Labor Statistics releases May inflation data. The FactSet consensus for headline CPI is 4.2% year-over-year, which would be the highest since April 2023. Bank of America projects a 0.46% monthly increase driven by energy. Core CPI consensus sits at 0.3% month-over-month, which would push core year-over-year to 2.9%, up from April’s 2.8%.
The arithmetic is straightforward. Energy accounted for more than 40% of April’s monthly CPI increase, per the BLS. Brent crude averaged above $94 for most of May and has not traded below $88 in three months. The Strait of Hormuz has been closed to neutral shipping since February 28. The EIA’s latest Short-Term Energy Outlook, released yesterday, now assumes the strait remains effectively closed through early June, with flows only slowly resuming through late 2026. That is not a transient supply shock. That is an energy tax embedded in every mile driven, every package shipped, every refrigerated shelf restocked.
The question the market has not priced. A 4.2% headline CPI print is already baked into the consensus. What is not baked in is the combination of that print with overnight strikes on Iran. If core CPI comes in at 2.9% or higher, the inflation story shifts from “energy-driven headline spike that the Fed can look through” to “broadening inflation that a new Fed chair cannot ignore at his first meeting.” Kevin Warsh convenes the FOMC on June 16. The dot plot published that week will carry more weight than any single data point. But the inputs to that dot plot are being decided this morning.
CME FedWatch now prices a 70% probability of a quarter-point rate hike by December, up from roughly 50% before Friday’s jobs report. Goldman Sachs has pushed its first rate-cut forecast into 2027. A six-month Treasury bill yields above 4%. The S&P 500 sits 3% below its June 2 record. The arithmetic that justified equity multiples last week required two things: earnings growth and the expectation of eventual rate relief. Overnight, the second pillar cracked a little further.
SpaceX prices tomorrow. The largest IPO in history targets $135 per share and a $1.75 trillion valuation. It arrives into a market that just absorbed a military strike, a potential 4%-handle CPI, and a yield curve that has not budged in four days. The backdrop for the biggest capital-markets event of the year is not the one the underwriters modeled a month ago.
Tuesday’s ceasefire lasted from roughly 11 a.m. to 5 p.m. ET. The market closed at 4. Oil traded on a peace that survived six hours. By 8:30 this morning, the BLS will tell us whether inflation has crossed 4% for the first time since 2023. The market has not priced either event. It will price both at once.
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