Tensions build in the Middle East as RBA Decision Uncertain

• The situation in the Middle East continues to feel unsettled. The US push to escort vessels through the Gulf has struggled to gain traction, with conflicting reports around a naval incident and very limited movement through the Strait of Hormuz, keeping markets on edge.
• Broader tensions are also building, with drone activity reported in the UAE, adding another layer of uncertainty and weighing on sentiment.
• Domestically, the focus is squarely on the RBA decision today. A tight labour market and trimmed mean inflation at 3.5% y/y in Q1 still point toward the case for higher rates, with the cash rate seen around 4.35%.
• Even so, the outcome is unlikely to be straightforward, with a split decision expected as some Board members may prefer to hold given the current global backdrop.
• On the data side, Australian household spending is released today, while offshore attention turns to US ISM Services and JOLTS, providing another read on activity and labour demand.