Hormuz Traffic Recovery Sparks Treasury Rally as Oil Sinks Below $70: June 24, 2026

A recovery in commercial traffic along the Strait of Hormuz is sparking a Treasury rally as inflation concerns are being quelled by crude oil plunging below $70 a barrel. The shipping rebound is raising optimism about the potential for a lasting peace deal between Washington and Tehran while stoking animal spirits on Wall Street. The relief in price-pressure expectations has duration leading today’s robust fixed-income performance as yields descend in bull-flattening motion led by the longer tenors. Modest short-end gains combined with a strengthening greenback are signaling that new Fed Chair Kevin Warsh is unlikely to be too impressed by sinking energy costs and likely wants to see broader progress in subduing goods and services charges prior to lightening his hawkish stance. Stocks are loving it, however, as a broad climb throughout the benchmarks has 10 of the 11 major sectors advancing amidst the Russell 2000 jumping to a fresh record. Tech is sluggish on a relative basis, though, as investors await an earnings report from 2026’s market leader Micron after the bell while they digest an equity offering from a key competitor, SK Hynix, which is seeking $29 billion to expand memory chip production deemed crucial for AI projects. Commodities are getting battered by favorable geopolitical developments, an appreciating dollar and a huge miss on new home sales that is adding to worries concerning real estate. Elsewhere, cryptocurrencies and volatility protection instruments are declining but prediction markets are catching bids.

New Home Inventories Jump to 46-Month High

New home sales dove last month as builders faced trouble closing deals amidst constrained affordability. Lofty valuations and elevated mortgage rates pushed up inventory, which is poised to temper future construction activity. The headline, at 580k seasonally adjusted annualized units, was almost a four-year low and it was the weakest figure since January. It marked a 7.3% month-over-month (m/m) decline and fell below both the 640k estimate and April’s 627k. Regional results were bifurcated, however, with m/m decreases of 26.9% and 4.1% in the West and South while Midwest and Northeast transactions grew 16.2% and 3% m/m. More broadly, supply hit a 46-month high, with the ratio of residences for sale relative to those sold rising to 10.3 months.

2s and 10s Spread Down to 25 Bps

The flattest yield curve in 15 months could invert by year-end if economic data disappoint against the backdrop of a Fed chair that is unlikely to quickly waver on his inflation priority in response to slowdown angst. Tomorrow’s numbers could further compress the 25-basis point (bps) spread between the 2- and 10-year maturities if heavy price pressure figures are met with sluggish consumer spending momentum. That is the expectation; however, cost statistics are better telegraphed by Wall Street than shopping details for these specific indicators, so a downside surprise on consumption is more likely than an upside inflation beat. But investors will be much more focused in the immediate term on Micron’s earnings report while especially trying to gauge the current inning of the AI revolution. Participants will seek clues about the appetite for additional capital expenditures, margins across the industry and the return prospects of the substantial investments that are being made.

International Roundup

BoJ Believes Manufacturing Will Offset Impact of US-Iran War

The Japan economy has recovered moderately, but it continues to face pressure from high energy prices and other challenges created by the US-Iran war, according to minutes released today from last week’s Bank of Japan (BoJ) meeting. The publication, while providing an encouraging economic outlook, is also increasing investors’ expectations for the central bank to enact additional rate hikes after it lifted its key benchmark 25 bps to 1% on June 16.

Looking ahead, strong corporate profits, demand for artificial intelligence hardware, government stimulus and the development of alternative sources of raw materials are likely to offset the impact of the Middle East crisis, allowing Japan’s economy to continue growing, albeit at a decelerated pace. While noting that the Consumer Price Index has dropped below the organization’s 2% target, policymakers maintain that inflation could strengthen due to businesses passing higher costs onto consumers.

Japan Reports Steady Corporate Services Inflation

Price pressures for corporate services were up 3.3% year over year (y/y) in May, matching both the economist consensus estimate and April’s pace, according to the Services Producer Price Index from the Bank of Japan. For the month-over-month (m/m) result, prices were unchanged, which also matched April’s print. With higher energy costs following the start of the US-Iran war, transportation experienced the most significant price pressures from both a y/y and m/m perspective. Indeed, when excluding international transportation, the index was up only 3% y/y.

For the m/m result, the stickers for the transportation and postal activities categories climbed 0.6%. Within this category, international air freight, domestic air passenger transportation, international air passenger transportation and ocean freight became 12.5%, 9.3%, 4% and 3% more expensive. Other categories that became pricier and the extent of their changes were as follows:

• Leasing and rentals, 0.2%
• Real estate services, 0.2%
• Finance and insurance, 0.1%
• Information and communications, 0.1%

Conversely, advertising services and the other services category declined by 1.3% and 0.1%, respectively.

Canada Manufacturing Sales Growth Slows

Sales of manufactured items in Canada climbed only 1.1% m/m in May, a notable deceleration from the 4.2% gain in April, according to preliminary data from Statistics Canada. The motor vehicle industry group and chemical subsector posted the fastest growth in May.