Markets spent the week caught between a stalled Hormuz negotiation and a Federal Reserve waiting on inflation data, with oil driving sentiment until Wednesday's CPI print took over.

By midweek, that inflation report gave markets the reassurance they had been holding out for.

The dominant driver early this week has been the breakdown in Strait of Hormuz negotiations.

Brent crude climbed above 87 dollars as the US and Iran failed to reach a deal to reopen the strait.

President Trump criticized Iran's demands for war compensation, dampening hopes for a swift agreement, and later hardened his position further by calling for reparations tied to Iranian attacks.

• Bond yields moved higher
• Most S&P 500 shares declined
• Hike expectations firmed as energy costs rose

Iran has been clear the route stays closed until its demands are met, even as Tehran and Oman appeared to move closer to a separate arrangement.

Cleveland Fed President Beth Hammack said several rate hikes could be required to return inflation to target, though she stopped short of prejudging where rates ultimately settle.

That hawkish tone built through Tuesday as oil pushed higher and the S&P 500 extended its pullback from record highs.

• Core CPI rose 0.2 percent month over month
• The annual rate came in at 2.5 percent, matching the slowest pace since March 2021

Money markets now price under 50 percent odds of a September hike.

The data gave the Fed room to stay patient rather than react to energy driven inflation.

Nvidia sank early in the week amid reports that major Wall Street firms are working with the chipmaker on a 500 billion dollar AI funding package.

That reversed by Wednesday, when a rebound in large chipmakers sent the Nasdaq 100 to a one month high.

The AI trade remains volatile on its own terms, largely independent of the oil and inflation story running alongside it.

Geopolitics → Oil → Inflation → Federal Reserve → Equity leadership

• Hormuz talks remain stalled, keeping oil elevated near 83 dollars
• Inflation data came in soft enough to ease near term hike pressure
• Fed officials remain split between hawkish caution and patience
• Chipmaker sentiment is swinging sharply on its own catalysts
• The S&P 500 is back within reach of record highs

Inflation data won the week. Geopolitics still sets the terms for how long that lasts.

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