Hormuz Risk Keeps Oil Elevated Ahead of US CPI and the Aussie Federal Budget

• Trump’s rejection of Iran’s peace proposal and threatened revival of “Project Freedom” drove Brent crude above $104.50 (+3%), keeping an elevated floor under oil prices and global inflation expectations as Strait of Hormuz disruption risk remains live.
• The oil shock feeds directly into the US April CPI, where headline inflation is expected to accelerate from 3.3% to 3.7% y/y. The key watch is whether energy is driving second-round effects into core goods, particularly with tariff pressures still in play.
• US Treasuries sold off 6-7bp (2-year 3.94%, 10-year 4.41%), with markets pricing zero probability of a Fed cut in June and only ~25% by December sustaining the higher-for-longer environment and keeping upward pressure on global fixed income pricing.
• Domestically, Australia’s NAB Business Confidence collapsed to -29 in March the second-largest monthly drop on record and expected to fall to -32 for April. The severity complicates the RBA’s task of balancing sticky inflation against a rapidly deteriorating activity outlook.
• Australian yields edged higher (3-year 4.71%, 10-year 5.04%) but were partly anchored by Federal Budget uncertainty. Tonight’s fiscal package is the key local watch, any net stimulus risk could firm the already ~85% priced RBA hike by August.