The week ending 29th May 2026 was defined by one dominant catalyst: escalating optimism over a US-Iran 60-day ceasefire extension and the prospective reopening of the Strait of Hormuz. WTI crude fell 9.6% WoW to $87.4/bbl, US 10Y yields declined 12 bps to 4.44%, and US equity markets extended their winning streak to nine consecutive weekly gains, with the S&P 500 and NASDAQ closing at fresh record highs. Japan’s Nikkei surged 4.7% to multi-decade highs as energy-importer terms of trade improved and AI-linked semiconductor names led the advance.
The macro backdrop, however, remains structurally constrained: April PCE inflation printed at 3.8% YoY; its highest since May 2023, with core PCE at 3.3%, keeping the newly installed Federal Reserve Chair Kevin Warsh (sworn in 22 May) firmly on hold with a hike bias.
Key Themes
- Strait of Hormuz Optionality: Ceasefire progress drove oil’s largest single-week decline of this conflict cycle (-9.6%). Physical flow restoration requires mine clearance by Iran and US port blockade removal, which is a multi-week process. The narrative is well ahead of operational reality.
- Sticky Inflation Beyond Energy: Core PCE at 3.3% and core services at 3.5% signal structural price pressure independent of crude. New Fed Chair Warsh inherits a hold-with-hike posture; BofA Global Research has pushed its rate cut call to the back half of 2027.
- Oil/Gas Divergence – A Structural Call-Out: A ceasefire restores tanker passage through Hormuz; it cannot restore Qatar’s Ras Laffan LNG facility, which sustained physical damage from Iran’s March 18 attack. QatarEnergy estimates a 5-year repair timeline. Oil fell on diplomatic news; natural gas rose on infrastructure reality.
- India Underperforms Despite the Tailwind: SENSEX fell 0.8% WoW despite oil’s collapse and INR strength. FII selling on May 29 alone totalled INR 21,106 Cr (~USD 2.2 billion) on the back of weak monsoon forecasts and late-session profit booking.
- Crypto-Equity Decoupling: Bitcoin fell 3.1% and the Bloomberg Crypto Index fell 2.2% as the S&P 500 hit record highs. Capital is concentrating in AI-linked productive assets, not speculative digital holdings. Bitcoin failed to break $83,000 and has formed lower highs since October 2025.
