In May, the Israel–Iran conflict entered its third month. While a fragile ceasefire largely held, intermittent frictions persisted, and negotiations remained stalled with both sides entrenched. Key disagreements center on control of the Strait of Hormuz and the disposition of enriched uranium—both considered non-negotiable red lines—suggesting limited prospects for near-term resolution and keeping oil prices elevated and volatile.
The U.S. economy remained resilient, with PMIs in expansionary territory and employment data consistently exceeding expectations. April CPI rose 3.8% y0y, the highest since June 2023, driven by energy, while core CPI increased 2.8%, indicating limited pass-through to broader goods. However, producer inflation was more pronounced, with PPI surging 6%, well above expectations. Treasury yields rose sharply, with the 10-year and 30-year surpassing 4.5% and 5%, respectively, effectively tightening financial conditions ahead of Fed leadership transition.
Gold retreated under yield pressure, while copper advanced on AI-driven demand and tariff support. Mining equities diverged, with Hong Kong-listed names particularly impacted by liquidity pressures and compressed valuations. AI remains the dominant market theme, especially in memory semiconductors, where structural supply-demand shifts continue to support leading players.
Entering June, stronger-than-expected nonfarm payrolls shifted rate expectations toward renewed tightening by year-end, triggering cross-asset volatility. Reports of China planning RMB 2 trillion in data center investment may catalyze the next leg of the AI cycle. Gold remains under multiple headwinds, with catalysts such as a reopening of the Strait or weaker U.S. data needed to reverse sentiment; attention will focus on upcoming Fed communication under new leadership.