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Last Week on Wall Street – June 14th, 2025

  S&P 500: -1.13%      DOW:  -1.79%       NASDAQ:  -1.30%      10-YR Yield: 4.41%

What Happened?

Markets took a hit this week as tensions flared in the Middle East and fresh economic data landed. The biggest shock came Friday when Israel launched a major strike on Iranian nuclear and military targets, prompting a swift retaliatory attack from Iran. The escalation rattled investors, raising fears of a broader conflict that could disrupt oil supplies through the Strait of Hormuz, a vital route for global energy. Oil prices surged, with Brent crude jumping over 7% and briefly spiking as high as 14%. Gold hit a new all-time high as investors moved toward safer assets, while defense stocks rallied and airline stocks sank. Major equity indexes ended the week lower, with the Dow falling more than 750 points on Friday alone.

On the economic side, May’s inflation data came in cooler than expected. Consumer prices rose just 0.1% for the month, and core inflation (excluding food and energy) matched that pace, both below what economists had forecasted. Wholesale inflation also stayed tame, with the Producer Price Index rising just 0.1%. These numbers suggest inflation is still under control, at least for now. Lower energy prices and falling vehicle costs helped keep things in check. But many economists believe we’re in a holding pattern. Tariff impacts haven’t fully shown up yet, and recent geopolitical developments could push energy prices higher, which may be reflected in future reports.

Meanwhile, consumer sentiment is showing signs of stabilizing. The University of Michigan’s early reading for June rose more than expected, a welcome shift after months of falling confidence. Still, sentiment remains historically low, and uncertainty around trade, tariffs, and global stability continues to weigh on outlooks.

Looking ahead, investors will be watching next week’s retail sales data, updates from the Federal Reserve, and signs of how global tensions may ripple through markets. While cooler inflation gives the Fed more room to consider rate cuts, rising oil prices and geopolitical risk may complicate that path. For now, markets are in a bit of a balancing act, caught between encouraging economic trends and growing global uncertainty.

Global Stocks Fall and Oil Soars After Israel’s Strike on Iran

  • Global stocks dropped and oil prices surged after Israel launched airstrikes on Iran. 
  • Safe-haven assets rose while airline stocks fell amid rising fuel costs and flight disruptions. 
  • Defense stocks surged as investors reacted to heightened geopolitical tensions.  

The key takeaway – Tensions in the Middle East escalated sharply after Israel launched targeted strikes on Iranian nuclear facilities and leadership, prompting swift retaliation from Iran. This back-and-forth raises the risk of a broader regional conflict, something markets are now being forced to price in.

The immediate concern is energy. With the Middle East playing a central role in global oil supply, any disruption could push prices higher, and that’s exactly what we saw, oil surged, bringing inflation risks back into focus just as investors were hoping for Fed rate cuts later this year.

Gold and the dollar saw strong demand as investors sought safety, but this isn’t just a “headline risk” moment. A sustained conflict could lead to higher costs for businesses, renewed pressure on consumer spending, and complicate central bank policy around the world. It’s a scenario eerily similar to what played out after the Russia-Ukraine war began.

At the same time, this kind of geopolitical uncertainty tends to put long-term investment decisions on hold. Companies may pull back on capex, consumers may get more cautious, and volatility could increase as the path forward becomes less predictable.

U.S. Inflation Rise 0.1% in May from Prior Month, Less Than Expected

  • The consumer price index increased 0.1% for the month, putting the annual inflation rate at 2.4%. 
  • Excluding food and energy, core CPI came in respectively at 0.1% and 2.8%, compared  with forecasts for 0.3% and 2.9%. 
  • Weakness in energy prices helped offset some of the increases, and a handful of other key items expected to show tariff-related jumps, vehicle and apparel prices in particular, actually posted declines.  

The key takeaway – Inflation came in softer than expected in May, giving markets a bit of relief. The Consumer Price Index (CPI) rose just 0.1% for the month, with core inflation (which excludes food and energy) also up just 0.1%, both below economists’ forecasts. That suggests price pressures remain in check for now, despite growing trade tensions and new tariffs.

A drop in energy and vehicle prices helped offset modest increases in food and housing costs. And importantly for consumers, real wages rose 0.3% in May and are up 1.4% year-to-date, a sign that pay is outpacing inflation, at least for the moment. Markets responded positively: stocks moved higher and bond yields dipped as investors gained more confidence that the Fed might have room to cut rates later this year.

That said, we’re cautious about reading too much into this one report. It reflects conditions before the recent escalation in the Middle East. Renewed conflict between Israel and Iran could lift oil prices, and with it, headline inflation in the months ahead. On top of that, as tariffs begin to work their way through supply chains, we may see increased price pressures in the second half of the year.

In short: this is welcome news, but we expect more inflation volatility ahead. We’re keeping a close eye on energy prices, global developments, and how the Fed responds as the economic picture evolves.

Wholesale Prices Ticked Up in May

  • Wholesale prices rose 0.1% in May, below economists’ expectations of 0.2%. 
  • The increase was attributed to service and goods prices, with food edging up and energy unchanged. 
  • The producer-price index rose 2.6% over the past 12 months, slightly above the prior month’s revised figure.  

The key takeaway – Wholesale prices barely budged in May, rising just 0.1% and coming in slightly below expectations. That mirrors the recent CPI report, which also showed minimal movement in consumer prices. On a year-over-year basis, the Producer Price Index rose 2.6%, with small increases in both goods and services. Energy prices were flat, and food costs ticked up only slightly.

So far, we’re not seeing major inflationary pressure from President Trump’s tariffs. Many businesses had stocked up ahead of the tariff hikes, which seems to be delaying any noticeable impact on prices. But this cushion won’t last forever.

As those inventories are drawn down, and with global tensions like the Israel-Iran conflict threatening to push energy prices higher, we may see more meaningful inflation later this year. Consumer sentiment is still historically low, but has started to stabilize, and inflation expectations have edged down. That suggests households and markets aren’t bracing for a spike in prices, at least not yet. 

The bottom line: While inflation looks tame right now, the second half of the year could look very different if geopolitical risks and trade policies begin to fully feed through. 

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