Energy Supply Risks Drive Global Repricing

• Brent crude briefly traded above US$95/bbl after the US expanded strikes on Iran and President Trump warned of further action if shipping through the Strait of Hormuz is disrupted. With no sign of renewed negotiations, markets are increasingly expecting a prolonged energy supply risk.
• Global bond yields extended higher, with the US 2-year reaching 4.30% and the 10-year climbing to 4.66%. Markets now fully price a Fed hike by September, while expectations for an RBA hike by December have risen to 85%.
• UK headline CPI eased to 2.6% y/y, but the result did little to shift Bank of England expectations. Higher fuel and utility prices are expected to keep inflation pressures elevated in the months ahead.
• Australia’s Westpac–Melbourne Institute Leading Index fell to -0.36% in June from -0.25%, reinforcing signs of below-trend growth as tighter financial conditions continue to weigh on the economy.
• Today’s focus shifts to Australian employment, the ECB policy decision, and US jobless claims. With markets firmly focused on inflation, the releases will help determine whether the recent move higher in bond yields has further to run.