Cool CPI Print Ignites Market Rebound as Bitcoin, Gold and Stocks Rip Higher
A combination of geopolitical tensions and a softer-than-expected inflation report drove a two-day reversal in global markets this week.
On Monday, a renewed U.S. naval blockade of Iranian ports and retaliatory strikes near the Strait of Hormuz pushed crude oil prices sharply higher. West Texas Intermediate settled at $79 a barrel, while Brent crude closed above $83—its biggest one-day percentage gain in more than six years.
Equities fell broadly. The S&P 500 dropped 0.79% to 7,515.34, the Nasdaq Composite lost 1.55% to 25,873.18, and the Dow Jones Industrial Average slid 0.26% to 52,498.64. Bitcoin touched a Monday low near $61,700, and gold fell about 1.4% to near $4,064 an ounce as a firmer dollar and higher real yields offset safe-haven demand.
The narrative flipped on Tuesday when the Bureau of Labor Statistics reported that headline CPI fell to 3.5% year over year in June, well below the 3.8% consensus forecast and down from 4.2% in May. The decline was driven mainly by a roughly 10% monthly drop in gasoline prices tied to a mid-June ceasefire that briefly reopened the Strait of Hormuz.
The softer inflation reading shifted expectations for the Federal Reserve’s next move. S&P 500 and Nasdaq futures rose in early trading. Bitcoin climbed back toward $64,000 intraday as traders unwound risk-off bets. Gold and silver also advanced, with silver gaining roughly 2%.
Federal Reserve Chair Kevin Warsh is scheduled to testify before Congress Tuesday and Wednesday as part of the central bank’s semiannual monetary policy report. Fed Governor Christopher Waller said Monday that a hot core inflation reading would push the central bank to consider raising rates soon. The Fed’s target range has sat at 3.5% to 3.75% since June, with the next policy decision on July 29.
The two-day swing underscores how tightly oil, inflation data, and risk assets are now linked. Energy costs pass through to headline CPI quickly, but the Fed’s preferred core inflation gauge—excluding food and energy—has stayed closer to 2.8% to 2.9%. Bitcoin and equities moved almost in lockstep, reflecting Bitcoin’s continued high correlation to Nasdaq-style risk assets. Gold’s Monday decline despite active fighting near a major oil chokepoint shows how rising real yields can outweigh safe-haven demand.
The blockade and Strait of Hormuz disruptions remain the biggest wildcard for markets. Since February, Iran has largely blocked shipping through the strait, which normally carries about a quarter of the world’s seaborne oil trade. Any further disruption could push oil and headline inflation back up quickly, even after Tuesday’s relief.
Investors now turn to Wednesday’s producer price index, Thursday’s retail sales data, and a wave of second-quarter bank earnings from JPMorgan Chase, Goldman Sachs, Bank of America and Wells Fargo. Warsh’s testimony will be closely watched for any signal on whether the Fed sees Tuesday’s soft CPI print as durable or as a one-month effect of falling gas prices.