This Week in Review | US-Iran Conflict, US Inflation, New UK Prime Minister

Transcript

Hello and welcome to This Week in Review.

This weekly segment is designed to highlight a few important developments you may have missed this week, what they may mean for markets, and most importantly, the potential impact for investors. To stay up to date with our latest market insights, subscribe to our YouTube channel or visit FisherInvestments.com. Now, let's review what happened this week.

First, the US-Iran conflict escalation.

This week, tensions between the US and Iran escalated further after President Trump announced he would reimpose a blockade on Iranian shipping. That came on the heels of his earlier announcement that the ceasefire was over. In light of this news, oil prices climbed back into the low 80s, with a nearly 10% jump on Monday alone. Understandably, some are wondering whether renewed tensions could mean more volatility ahead or even re-accelerating inflation. While more volatility is always possible, we don't think this week's developments mark a radical shift from where things stood before the escalation. For months now, we've highlighted how businesses have adapted to energy supply constraints, making the Strait of Hormuz less critical than it once was. Energy suppliers ramped up pipeline use, boosted production outside the Persian Gulf and increased US oil exports. Countries like Japan source new suppliers. Yes, the Strait may never return to exactly what it was before the conflict, but global markets have shown they don't require perfection to keep functioning. History offers additional perspective. Consider Russia's 2022 invasion of Ukraine. That event forced far larger and more permanent structural shifts across global energy markets. And, even then, Brent crude peaked at roughly $133 per barrel before normalizing relatively quickly. Today's oil price of around $80 per barrel sits comfortably between those extremes, even with fresh strikes and tanker attacks in the news. The key reminder for investors is that markets are resilient and they're forward looking. They actively weigh future conditions 3 to 30 months out, not just today's headlines. We think markets are already pricing in a future where the Strait of Hormuz plays a diminished role. Seeing continued conflict is disheartening, but a calm, long-term view serves investors far better than reacting to short-term movements.

Next, US June inflation figures.

On Tuesday, the U.S. Bureau of Labor Statistics released June's Consumer Price Index data, or CPI, showing headline inflation decelerated to 3.5% year over year. That was lower than economists had forecast, and it marks the first deceleration in year-over-year CPI in 2026. Digging into the data, the deceleration was broad based. Energy costs, which had been the primary driver behind recent inflation readings, declined in June. Gasoline prices dropped roughly 10% month over month, though they're still up for the year. Now, some commentators warn July's numbers may look less friendly given the US-Iran conflict escalation we discussed a moment ago. But here's where we'd offer some perspective. Inflation is fundamentally a monetary phenomenon driven by too much money chasing too few goods and services. With global money supply growth still moderate, we continue to think a sustained inflation spike is unlikely even with this week's developments. For long-term investors, June's data is a useful reminder that when fears run hot, reality often lands cooler than expected. Rather than reacting to any single month's reading, whether it looks alarming or reassuring, stay focused on the broader monetary and economic fundamentals that drive markets over time.

Finally, the UK's next prime minister.

This week, Andy Burnham received enough Labour Party support to become the UK's next prime minister with the backing of over 80% of the party caucus. He will officially become the prime minister on Monday. Although Burnham has touted some lofty goals in the past, he'll inherit the same headwinds that dogged Starmer's tenure. On top of that, the next UK general election isn't required until 2029. That means Burnham has to manage internal party factions and navigate political gridlock within Labour's own ranks. Both could temper any sweeping legislative shifts, which is actually a quiet positive for markets. As we've said before, markets move on the gap between expectations and reality. And right now, expectations for Burnham are already low. Chatter about tax hikes, nationalizations and bond market jitters has dominated UK headlines for weeks. That widespread pessimism actually reduces the potential for negative surprises, and opens the door for reality to positively surprise if policy proves less disruptive than feared.

That's it for this week.

Thanks for tuning in to This Week in Review. If you're looking for more insights, then don't miss our other series Three Things You Need To Know This Week, released every Monday. You can also visit FisherInvestments.com any time for our latest thoughts on markets. Thanks again for joining us, and don't forget to hit Like and Subscribe.