We wake up this morning to lower oil prices and a bond market that appears to be looking past the latest diplomatic setbacks. Investors seem to be increasingly pricing in the possibility that the conflict may ultimately be resolved through force rather than negotiation.

One thing remains constant: markets hate uncertainty.

Despite ongoing tensions, reports indicate that more than 200 ships successfully transited the Strait of Hormuz, carrying over 100 million barrels of oil. The fact that global energy shipments continue to move is helping ease some of the market’s worst-case supply concerns.

On the inflation front, wholesale inflation came in hotter than expected. However, a deeper look into the report shows much of the increase was driven by producer-level pricing pressures, particularly energy-related costs.

There is no question that inflation has been moving higher, and it remains one of the biggest challenges facing both consumers and policymakers.

When the conflict with Iran eventually subsides, the inflation outlook could improve meaningfully over time. Lower geopolitical tensions would likely lead to lower energy costs, and lower energy costs tend to work their way through the economy.

Jobless claims rose by 4,000 to 229,000, above expectations of 219,000. While higher than forecast, the number is not alarming and continues to point toward a labor market that is gradually cooling rather than abruptly weakening.

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