Summary of Oil, Warsh, and Inflation - Will the Dollar Come Out on Top?
Date: 13 July 2026
Market Overview
The week commenced with notable increases in energy commodity prices, coinciding with a general retreat from risk among investors. This shift is largely attributed to a statement from the Islamic Revolutionary Guard Corps, declaring the closure of the Strait of Hormuz "until further notice." This geopolitical tension has implications for oil prices and the broader market.
Geopolitical Factors
The rise in crude oil prices, with Brent crude priced at over $78 per barrel and WTI around $74, is favorable for the US dollar, especially as the US is a net exporter of oil. However, conflicting communications from the US and Iran contribute to market uncertainty. While Donald Trump has dismissed Iran's blockade claims, asserting the route remains open for lawful vessels, Iran threatens severe retaliation against any US actions in response to the blockade. The market has not yet fully priced in a worst-case scenario, although volatility could spike with further military actions in the region.
Kevin Warsh's Congressional Hearing
On Tuesday, Federal Reserve Chair Kevin Warsh is scheduled to appear before Congress for a bi-annual hearing. This follows his first meeting as Chair, which was perceived as moderately hawkish. Warsh's intention to withdraw forward guidance has drawn criticism, and he is expected to face tough questions regarding his monetary policy approach, particularly in relation to inflation management.
Inflation Insights
Prior to Warsh's hearing, the June inflation data is set to be released, with expectations of no significant changes in core inflation (projected at 2.9%) and a slight decline in the headline measure (projected at 3.9%). Despite these projections, inflationary pressures remain high, prompting Congress to seek clarity on Warsh's strategies for achieving the target inflation rate. Warsh has previously indicated that he will not tolerate elevated inflation for the sake of job protection and has dismissed the idea of raising the inflation target.
Technical Analysis of EUR/USD
The EUR/USD currency pair has been in a downward trend since early April, currently stabilizing around 1.14. The exchange rate remains below key moving averages (50, 100, and 150-day), which serve as resistance levels. The technical indicators suggest a continued advantage for the supply side, with the RSI at 43.8 indicating bearish momentum.