Bitunix Analyst: Market trading isn’t just PPI cooling—it’s about energy supply and long-term inflation expectations

BlockBeats, July 16: The U.S. June PPI came in across the board below market expectations, indicating that upward pressure on upstream prices has temporarily eased. However, Fed Chair Waller still clearly stated that one month of data is not enough to reflect the true inflation trend, and emphasized that he is currently dissatisfied with any inflation indicator. New York Fed President Williams, meanwhile, believes the policy interest rate remains at an appropriate level, and whether it will be adjusted will depend on subsequent data. This suggests the Fed at this stage is still unwilling to change its policy stance early due to short-term inflation improvement, and the high-rate environment will continue to suppress market liquidity.

On the other hand, the conflict between the U.S. and Iran is escalating. The Trump administration is assessing expanding military operations, including striking more Iranian energy facilities and strategic outposts around the Strait of Hormuz. U.S. forces are also continuing military actions against Iran, while Iran has said there is currently no plan for negotiations and continues to carry out military responses. More notably, the large amount of strategic petroleum reserves released by the International Energy Agency (IEA) has nearly been depleted, which means the market’s available buffer capacity against a new supply shock has fallen significantly.

What is truly worth watching is not today’s rise or fall in oil prices, but the safety margin in global energy markets is shrinking. If transportation through the Strait of Hormuz is again blocked for an extended period, even if oil-producing countries can export via alternative routes, they will not be able to completely fill the global supply gap. Refining products, shipping costs, and companies’ production costs could all face renewed pressure, further pushing up the stickiness of core inflation over the coming months.

From a market-pricing perspective, the cooling in PPI helps reduce the uncertainty around short-term rate-cut expectations. But bond yields curve continues to steepen, reflecting that funds do not believe the inflation problem is over; instead, they are reassessing risks related to energy supply, fiscal deficits, and long-term price pressures. In the future, market focus will gradually shift to the end-of-month PCE data and developments in the Middle East. If energy prices continue to stay elevated, the possibility that the Fed will maintain a tight policy—and even keep room for further tightening—will remain. Global risk assets in the short term will still face volatility driven by both policy and geopolitical factors.