May CPI Hits a Three-Year High of 4.2% While Core Cools. US Strikes on Iran Push Brent Back to $93.

Wednesday post-CPI, 8:45 AM ET. The dual punch today is a CPI print that confirms the Iran-driven energy shock is flowing through to headline inflation, paired with an overnight military re-escalation that makes the underlying supply disruption worse. May CPI came in at 4.2% year-over-year, matching consensus and marking a three-year high. The number is ugly on the surface: energy costs surged 23.5% year-over-year (vs. 17.9% in April), food accelerated to 3.1% (from 2.3%), and shelter ticked up to 3.4%. This is the third consecutive monthly acceleration in headline inflation. However, the saving grace is core CPI, which rose just 0.2% month-over-month versus the 0.3% consensus, while annual core held at 2.9%. That below-consensus core read is what allowed futures to pare their early losses; it tells you the inflation problem is concentrated in energy, not broadening. The question for Kevin Warsh’s first FOMC on June 16-17 is whether a structurally driven energy shock warrants a rate hike or whether the Fed should look through it. Markets still price over 60% odds of a hike by October, but today’s core print gives the doves some ammunition.

The geopolitical situation deteriorated significantly overnight. The US launched strikes against Iranian air defense systems, ground control stations, and surveillance radar near the Strait of Hormuz after Iran downed a US Army Apache helicopter patrolling the strait. Iran’s Revolutionary Guard retaliated with missile strikes targeting US military bases across Jordan, Bahrain, and Kuwait, triggering air raid sirens across the region. President Trump stated that Iran “had taken too long to negotiate” and is reportedly close to ordering strikes on Iranian power plants and bridges, a sharp rhetorical escalation from Tuesday’s more conciliatory tone. Qatari negotiators traveled to Tehran on Wednesday morning in an effort to salvage some form of dialogue, but the situation is fragile. The April ceasefire, which only held for two months, is now effectively dead. Any path to a Hormuz reopening deal, which would require denuclearization and port access concessions, looks increasingly distant. The Strait has been effectively closed since March 4, blocking approximately 12-13 million barrels per day and creating the largest oil supply disruption in history.

Oil responded immediately. Brent crude surged 1.8% to $93.10 per barrel, reversing most of Tuesday’s decline that followed the brief Iran-Israel mutual halt on attacks. WTI climbed 0.7% to near $89.80, just below $90. The market is caught between two forces: the fundamental reality of the Hormuz closure driving structural supply tightness, and the diplomatic oscillations that create violent two-way swings. The CPI data underscores that these oil prices are already bleeding into the real economy at a pace that is making Fed policy extremely difficult. Gold pulled back to $4,305 from $4,350 yesterday as the dollar strengthened slightly above 100 on safe-haven flows. Bitcoin crashed to a 19-month low of $60,746 as the combination of risk-off selling, a stronger dollar, and regulatory uncertainty around stablecoins created a multi-front bear environment.

Super Micro Computer plunged 13.6% to $36.94 in pre-market after announcing $7 billion in equity-related financing to purchase components and build AI servers. The dilution spooked investors despite the company’s strong operational performance: revenue reached approximately $10.24 billion (up 123% year-over-year) and the backlog stands at over $39 billion with partnerships spanning Nvidia and AMD. The move highlights a tension running through the AI infrastructure buildout. Companies at the physical layer of AI (servers, networking, power) are seeing enormous demand but also need enormous capital, and the market is punishing the ones who fund growth through dilution rather than cash generation. The broader semiconductor complex is lower in sympathy: Nvidia fell 2.1% to $208, Micron dropped 4.3% to $896 (ahead of its June 24 earnings), and Arm Holdings lost 4%.

The marquee event after the close tonight is Oracle’s fiscal Q4 2026 results. Oracle enters with a record $553 billion in contracted future revenue, and this report is the first real test of whether that AI backlog is converting into actual recognized revenue. Analysts expect 20% revenue growth. The bull case is verifiable demand outrunning supply, guidance already embedding up to 50% cloud growth, and a potential 34% FY2027 growth guide. The bear case is $50 billion in annual capex, negative near-term free cash flow, and financing that could approach $100 billion. The stock has been repriced dramatically since March and is priced for execution.

Asian markets sold off on the Iran re-escalation. The Nikkei dropped 1.89% to 64,179, giving back Monday’s recovery, as the yen strengthened on risk-off flows and Japanese exporters came under pressure. The Hang Seng fell 0.64% to 24,408 on continued tech weakness and property sector concerns, though the damage was muted by Tuesday’s strong Chinese trade data (exports surged 19.4% year-over-year to a record $376.8 billion in May). The CSI 300 dipped 0.7% to approximately 4,870. European markets opened sharply lower: the DAX fell 1.4% to 24,433, the FTSE 100 dropped 1.1% to 10,227 with energy stocks whipsawing on oil volatility, and the Stoxx 600 declined 1.0% to 616.

In the broader geopolitical landscape, Taiwan’s navy is stepping up support for coastguard patrols around the Dongsha (Pratas) Islands after Chinese coastguard activity near the South China Sea atoll surged to 39 incidents since February 2025. China recently conducted its first coordinated operation near the atoll involving coastguard vessels and a research ship, a signal that Beijing is refining its grey-zone tactics. The situation adds another layer of risk to an already elevated global threat environment.

The FIFA World Cup opens tomorrow across the US, Mexico, and Canada, the first 48-team tournament in history. Geopolitical complexity surrounding the event is significant: the ongoing Iran war, trade frictions among the three hosts, and immigration enforcement concerns have all dampened the economic uplift that typically accompanies major sporting events. Hotel bookings across the 11 US host cities are tracking below initial forecasts.

May CPI Breakdown

Our Take: The headline number is a three-year high and looks alarming in isolation, but core inflation is the better read for Fed policy and it came in below expectations. The inflation problem is almost entirely energy-driven, a direct consequence of the Hormuz closure. A rate hike in response to a supply shock would be textbook policy error, but Warsh may feel political pressure to act given the optics of 4.2% headline inflation. Watch for the June dot plot to signal whether the committee views this as transitory or structural.

Key Events Today

Key Events This Week

Pre-Market Movers

Geopolitical Tracker

US-Iran: The US launched strikes against Iranian air defense sites, ground control stations, and radar installations near the Strait of Hormuz after Iran downed a US Army Apache helicopter. Iran’s Revolutionary Guard retaliated with missile strikes on US bases in Jordan, Bahrain, and Kuwait. Air raid sirens sounded across multiple countries. Trump warned that Iran would “have to pay the price” and is reportedly considering strikes on Iranian power plants and bridges. Qatari mediators traveled to Tehran but prospects for a deal are dim. The April ceasefire is effectively dead.

Strait of Hormuz: Closed since March 4, blocking approximately 12-13 million bpd. OPEC+ approved a symbolic 188,000 bpd increase for July, insignificant against the scale of the disruption. The UAE announced its withdrawal from OPEC+, chafing at production quotas while the cartel’s relevance is being tested by the largest supply disruption in oil market history.

Taiwan-China: Taiwan’s navy is now supporting coastguard patrols around the Dongsha Islands after 39 Chinese coastguard incursions since February 2025. Beijing conducted its first coordinated coastguard-research vessel operation near the atoll, testing Taiwan’s grey-zone response capabilities. Another pressure point to monitor alongside the Iran theater.

This note reflects information available as of June 10, 2026, 8:45 AM ET. S&P 500 futures are at 7,410 (-0.55%), Nasdaq 100 futures at 28,883 (-0.80%), and Dow futures at 50,706 (-0.40%), with losses pared after the May CPI report landed in line with expectations. Core CPI at 0.2% MoM undershot estimates, providing a modest lift. Overnight US strikes on Iran and retaliatory missile fire on US bases drove oil higher and risk assets lower. Brent crude at $93.10 (+1.8%), VIX at 20.45 (+8.1%), Bitcoin at $60,746 (19-month low). Oracle Q4 after the close tonight. First Warsh FOMC June 16-17. For internal use only. Not investment advice.