🇺🇸❗️U.S. Inflation Seen Rising Back to 5% On Higher Oil: Cable FX Macro

• Are we set to get a second wave of inflation as Middle East conflicts keep oil trading higher? Most of OPEC's spare capacity is located in the region, a range of potential risks from military strikes to a shut-down of the Strait of Hormuz will likely push premiums up. For now, we have not seen disruptions in energy supplies, but there were reports of American supertankers U-turning to avoid the area. Larger transport routes would likely increase the cost of moving energy across the world.

• Consumer prices have moved lower and closer to the Fed's target, central banks across the world have eased policy to different extents. Last year, the Fed cut interest rates by 50bps as inflation measures slowed. The current Middle East risks add to a toxic mix where global economies slow, U.S. imposes tariffs and inflation measures remain above target.

• Analysts at J.P. Morgan had noted that an attack on Iran would push CPI back to 5% as crude oil rises. If inflation moves up to the point it influences rate expectations, we could see risk assets starting to trade less complacent while yields turn higher.