May CPI Expected to Accelerate as BlackRock Highlights Energy Shock Concerns

BlackRock is closely monitoring Wednesday’s CPI release as an early signal of how rising U.S.–Iran tensions may be adding to already elevated inflation pressures in the U.S. economy.

The firm is also focused on May’s inflation data for a clearer picture of how the ongoing geopolitical conflict is feeding into persistent price pressures.

In its weekly commentary, BlackRock Investment Institute said, “We look to May U.S. inflation figures for a clearer read on how the Mideast conflict energy shock is impacting already sticky inflation. The full breadth of the shock has yet to show and will depend on how it evolves.”

The May U.S. Consumer Price Index is due Wednesday at 08:30 am ET. Economists surveyed by Reuters expect inflation to rise 4.2% year over year, the highest level since April 2023 and up from 3.8% in April.

If that forecast holds, it would reinforce concerns that inflation remains well above the Federal Reserve’s 2% target, increasing the chance that policymakers may lean toward further rate hikes rather than the cuts markets had been expecting earlier in the year.

Higher interest rates typically reduce demand for risk assets, including cryptocurrencies. A stronger-than-expected CPI reading could therefore add pressure on crypto markets, especially after Bitcoin already dropped nearly 14% last week and slipped below $60,000.

BlackRock also pointed to a key risk scenario involving a prolonged shutdown of the Strait of Hormuz extending into July. Such a disruption could intensify the energy-driven inflation shock, particularly if U.S. oil inventories fall toward their lowest levels in four decades.

The firm added, “We think a prolonged closure of the Strait of Hormuz into July could bring the impact of the shock to the fore more prominently, especially as U.S. oil inventories potentially hit four-decade lows.”