Oil jumps 9% in a day and a rate hike is back on the table

Good morning. The Strait of Hormuz is once again the market’s biggest wild card. President Trump said he would restart a naval blockade of Iran and charge a 20% fee on all cargo passing through the strait. With Iran declaring the strait closed, oil spiked as much as 9% during the session. The International Maritime Organization objected, saying forced tolls have no legal basis.

The waterway is already quiet. Just 14 ships crossed Hormuz on Sunday, down nearly 60% from a week earlier and the fewest in two months, and some vessels are slipping through with their location signals switched off. The U.S. Strategic Petroleum Reserve is at its lowest in 43 years, so there is little cushion. Europe’s jet fuel stocks are said to be below a month’s supply.

Oil prices are inflation, and inflation is the Fed. Governor Christopher Waller warned that inflation is spreading beyond energy and tariffs, and that if this week’s consumer price report runs hot, a rate hike may soon be needed. Futures now price a 46.5% chance of a July hike. The debate has shifted from whether to cut to whether to raise.

Stocks were pressed. The Dow fell 138 points, or 0.26%, to 52,498, and the Nasdaq fell more as chips tumbled. SK Hynix, which made its Nasdaq debut last week, dropped right after listing and dragged Samsung down with it, and South Korea’s Kospi sank 9%. Some now say the memory-chip bull case is starting to crack.