Holding Steady as the Iran Truce Cools Oil, Not Inflation

This Week in Context

The week's two biggest headlines pointed in opposite directions, and the book is built to sit still when they do.

On Sunday, the United States and Iran agreed to an extended ceasefire that ends the blockade of Iran's oil and reopens the Strait of Hormuz, the waterway that carries a large share of the world's seaborne crude. Oil fell hard. Brent crude dropped to a two-month low near $87 a barrel, and stocks, gold, and Bitcoin all rose together on Monday.

Then the inflation data landed. The May Consumer Price Index (CPI), released by the Bureau of Labor Statistics (BLS) on June 10, rose 4.2% from a year earlier, the fastest pace since 2023. Energy did most of the damage, which is exactly the part the ceasefire should now cool. Core inflation, which strips out food and energy, was tamer at 2.9%.

So the market got relief on the geopolitical risk and a reminder on the inflation risk in the same week. Our response is to hold all of it: 40% in short-dated Treasury bills, a quarter in hard money (gold, silver, Bitcoin), and the rest in stocks.

Macro Landscape

Lower oil is the clearest channel from the ceasefire to everything else. Energy drove most of May's price increase, so a sustained drop in crude takes pressure off the next few inflation reports and, with it, some pressure off the Federal Reserve.

That helped the bond market. The 10-year Treasury yield eased to about 4.43%, down from roughly 4.55% the week before, and the dollar softened. But the relief has limits. With headline inflation at 4.2%, futures markets still lean toward at least one rate hike before year-end rather than the cuts priced at the start of the year.

This is the cash sleeve earning its keep. Short-dated Treasury bills pay close to 3.6% with no duration risk, which means they do not lose value when long-term yields rise. Long-duration government bonds, which do, remain an avoid. We own none.

Sector Spotlight: A Ceasefire That Cools Oil, Not Inflation

The temptation after a week like this is to read the rally as the all-clear and add risk. We are not doing that, for one reason: the ceasefire fixes the part of inflation that was already going to fade and does nothing for the part that is sticky.

two headlines, one week

Sunday: a ceasefire reopens the Strait of Hormuz, oil falls. Wednesday: inflation prints 4.2%, the hottest since 2023. The book does not move.

Energy was over half of May's monthly price gain, so cheaper crude genuinely helps the headline number from here. But core inflation at 2.9% is the stickier signal, and a strong labor market gives the Federal Reserve no reason to ease into it. The honest counter-argument is that falling oil plus a resilient economy is a good backdrop for stocks, which is why we hold 35% in equities rather than zero. It is also why we do not add at new highs into a Fed meeting that could drop its easing bias entirely.

Crypto Corner

Bitcoin rebounded with the rest of the risk trade, trading near $65,700 after breaking below $60,000 a week earlier. Some analysts now peg fair value for Bitcoin in the mid-$60,000s, and the worst of the forced selling across the major coins looks to have passed.

That is a steadier tape than we have seen in weeks, but it is not yet the signal we need. The $76,000 line we have flagged for a month is still broken, and a bounce inside a downtrend is not the same as a trend that has turned. Our plan has not changed: hold the 7% position, do not chase, and wait for spot to reclaim $76,000 before scaling in. The long-horizon case (persistent deficits, a central bank under political pressure, negative real wage growth) is intact. The near-term tape just has not earned an add.

Looking Ahead

Two things to watch.

First, the Federal Open Market Committee (FOMC) decision on June 17, the first meeting chaired by Kevin Warsh. A hold is near-certain. The signal is whether the committee drops its easing bias and admits the next move could be a hike. A hawkish shift would lift the front end of the curve, where our cash sits, and pressure long equities.

Second, whether oil keeps falling. If the Strait reopens cleanly and crude drifts lower, the headline inflation scare fades and the case for patience on gold and stocks strengthens. If the ceasefire frays, oil snaps back fast and the inflation problem gets worse, not better. We hold the hedge either way.

The book is unchanged: 27% VOO, 8% VWO, 13% GLD, 5% SLV, 7% BTC, 40% BIL. A calmer week did not change the math, so we did not change the book.