Investors continue to evaluate what the new inflation picture and Middle East developments will mean for the market. US inflation rose from 3.3% to 3.8%, almost double the Federal Reserve’s target. The release slightly supports the US Dollar and pressures the stock market. Gold, on the other hand, continues to honour its recurring price range.

Although investors are now turning their attention to the Middle East and President Donald Trump’s visit to China, the market remains highly sensitive to geopolitical developments.

Crude Oil Above $100 As No Oil Flows To Kharg Island

The price of crude oil continues to trade above $100 per barrel for a second consecutive day. Even though the $100 per barrel level is a key psychological price for the asset and even a resistance point at times, the price will largely depend on further developments.

Negative geopolitical signals are driving support. US President Donald Trump rejected Iran’s peace proposal, calling it ‘unacceptable’, and said the chances of reaching a ceasefire are now ‘unbelievably weak’. This has intensified concerns over possible supply disruptions in the oil market and a widening physical deficit globally.

The longer-term outlook under continued geopolitical tensions remains negative according to most analysts. The Strait of Hormuz, a key maritime route, remains heavily constrained. So far, only around 25.0% of flows have been rerouted, which is not enough to offset the impact of the energy shock.

In addition to the above, Iranian oil shipments from Kharg Island appear to have stalled in recent days, according to satellite images. No oil tankers arrived at the island on May 8, 9, 10 and 11. If the terminal remains idle, pressure could build on Iran’s storage facilities, which already appear to be filling up. As a result, Iran's oil industry could face severe disruption adding further to geopolitical tensions and pressuring supply.

Gold - US Inflation Rises But Gold Sticks To Its Range

The yellow metal continues to trade within the price range seen over the past week. The main risks for the asset are bond yields, interest rates, and the US Dollar. Currently, these three factors make Gold look less attractive to investors. However, if the Middle East conflict de-escalates, Gold may gain further bullish momentum.

US market participants are also reviewing the latest inflation data. The monthly CPI fell from 0.9% to 0.6% in April, but annual inflation rose from 3.3% to 3.8%, above expectations of 3.7% and the highest level since September 2023. The increase was mainly driven by higher energy prices linked to the US-Iran confrontation.

Core CPI, which excludes food and energy, rose by 0.4% month-on-month and 2.8% year-on-year, supporting the Fed’s more hawkish stance. According to the CME FedWatch Tool, markets now see a 97.6% chance that rates will remain at 3.50-3.75% at the 17 June meeting.

At first the price of Gold fell to a weekly low, but then quickly returned to the same price as before the CPI release. Gold is showing a strong reverting pattern, with each impulse wave correcting thereafter. The current average price of the range is $4,708.25 and the price becomes at risk of correcting after increasing 1.13% above this level (based on price deviations). This also applies if the price drops below the average price by 1.26%.

NASDAQ - Investors Turn Their Focus Towards Trump’s China Visit

The NASDAQ saw its strongest decline since the end of March which is understandable considering the price is at extremely high levels and the higher inflation figure negatively impacts stocks. Nonetheless, the price is correcting again this morning.

Two key points for the NASDAQ over the coming sessions will be the outcome of President Trump’s visit to China and Walmart’s earnings report. Investors will closely monitor any developments regarding trade relations, tariffs, and supply-chain cooperation between the world’s two largest economies. Any signs of easing tensions could support market sentiment, particularly within the technology sector. Any indications of tensions can quickly turn bulls into bears.

At the same time, Walmart’s earnings could provide important insight into the strength of US consumer spending. As one of the largest retailers in the world, Walmart is often viewed as a key indicator of consumer confidence.

Strong results may help reassure investors that consumer demand remains stable despite higher inflation and elevated interest rates. Walmart stocks were one of the few that rose in value on Tuesday. This also indicates shareholders expect positive data. Walmart is the 9th most influential company for the NASDAQ after Meta Platforms.

Key Takeaways:

• US inflation increased from 3.3% to 3.8%, strengthening expectations that the Fed will keep interest rates high.
• Disruptions around the Strait of Hormuz and stalled Iranian exports from Kharg Island continue to keep oil prices above $100.
• Although higher inflation and bond yields initially pressured Gold, the metal continues to trade within a stable range as investors balance geopolitical risks and monetary policy expectations.
• Higher inflation triggered the NASDAQ’s biggest decline since March, but investors are now focusing on Trump’s China visit.
• Investors view Walmart’s earnings as an indicator of US consumer confidence and economic resilience. Walmart is to release its earnings report today before the market open.