Market Update

The geopolitical standoff continues, and the threat of a broader regional conflict remains serious. Iran has warned that the Strait of Hormuz is a non-negotiable red line and has stated it would target oil infrastructure throughout the region, including neighboring countries, if the U.S. were to carry out attacks on Iranian power plants or bridges.

If tensions escalate, oil prices could move higher quickly. Higher energy prices typically increase inflationary pressure, which can negatively impact the bond market and push mortgage rates higher.

On the economic front, June retail sales increased 0.2%, meeting expectations, while May’s figures were revised higher, indicating consumer spending remains resilient.

There was also encouraging news on housing inflation. The latest May rental report showed rents were up 1.3% year over year, a slower pace than the previous report and consistent with expectations that shelter inflation is continuing to moderate.

Bottom Line: Markets are balancing improving inflation data against elevated geopolitical risks.

If tensions ease, the outlook for bonds and mortgage rates could continue to improve. If the conflict widens, expect increased volatility across the financial markets.

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