Three Scenarios for Oil Prices after Peace Talks
With a 60-day ceasefire in effect and the U.S. and Iran holding peace talks, oil prices have moved meaningfully lower from their wartime highs. Crude trades at around $75 a barrel as I write, down from a peak of nearly $120. Gasoline prices have also started to ease, giving consumers some relief after a difficult stretch of higher energy costs.
Overall, prices are moving in the right direction. But investors should be careful not to assume that energy markets can simply reset overnight. A reopening of the Strait of Hormuz does not immediately restore every barrel of lost production, every shipping route, every refinery, or every depleted inventory. It will take some time.
I think about the next several months in terms of scenarios, with three possible outcomes I see. In a favorable scenario, shipping flows continue improving, producers restore output, inventories begin to rebuild, and the risk premium in crude prices gradually declines. Gasoline prices would likely follow, with a lag.
In a more uneven scenario, the Strait reopens only gradually, with cautious shipping firms and high insurance costs keeping inventories tight. In that case, oil prices may stay above pre-crisis levels even though the worst disruption has passed. Finally, in a higher risk scenario, negotiations stall, shipping disruptions reappear, and/or the market loses confidence that the Strait will remain reliably open. In that case, oil could quickly reprice a larger disruption risk premium.
The key is that all three scenarios are plausible enough that investors should avoid anchoring to any single forecast. But at the same time, the recent crisis also reminded everyone that global oil markets are flexible and adaptable and may not ultimately have as much impact on U.S. economic growth as many believe. In other words, if my worst case scenario above transpired, we’d almost certainly see market volatility and higher energy prices again, but not necessarily a spike in recession probability.
That’s because the past few weeks have shown us how producers find alternative routes, exports get redirected through pipelines, countries across the world increase production, and consumers shift behavior. Indeed, demand fell in recent weeks as higher prices encouraged conservation, substitution, and reduced usage.
One asterisk that remains is the inflation picture. Energy shocks often work through the economy with a lag, with higher fuel and input costs taking time to appear in food prices, electricity bills, shipping costs, and some manufactured goods. Farmers may have already locked in higher fertilizer costs, for instance, and transportation costs can take time to move through supply chains.
For the Federal Reserve, policymakers will likely want to see whether energy-related price pressures fade or spread. If crude stabilizes and the pass-through remains limited, the inflation impact should become more manageable. If energy costs keep filtering into broader prices, the Fed may stay cautious for longer—an outcome the equity markets may not love.
At the end of the day, the agreement is good news. It lowers the probability of the worst-case energy scenarios and gives markets a clearer path toward stability. But it does not mean energy markets, inflation data, or consumer prices instantly return to where they were before the conflict.
Bottom Line for Investors
The most important lesson from the past few months may not be that oil prices rose during the crisis or fell after the ceasefire. It is that markets and economies adjusted faster than many expected. Producers found new routes, importers used reserves, consumers changed behavior, and demand responded to price. Those adjustments helped prevent the energy shock from becoming a full-scale economic shock.
Investors should take these recent events as a useful reminder that energy risk can move markets, but markets are not helpless in the face of it. The agreement reduces pressure, but the real story is adaptation. Oil markets still need time to normalize, and inflation effects may linger, but the worst-case scenarios look less likely today than they did a few months ago.
1 Wall Street Journal. June 17, 2026. https://www.wsj.com/economy/global/five-things-the-hormuz-crisis-taught-us-about-the-global-economy-c9bd6b45 June 26, 2026
Is AI Helping or Hurting Inflation?
With a ceasefire in place between the U.S. and Iran, energy’s contribution to inflation pressure is expected to ease. But there may be another catalyst in the wings that is more secular in nature: America’s enormous AI build-out, the scale of which is difficult to fathom. Analysts estimate capital spending this year at five hyperscalers (Alphabet, Amazon, Meta, Microsoft, and Oracle) will reach $741 billion, up nearly 75% from last year. Companies have already announced some $1.5 trillion in data-center plans, with only a small portion of that investment in place so far. The inflation piece that’s interesting here is the reminder that the AI boom is not just about software. It is a physical build-out requiring chips, servers, cooling systems, cables, backup power, and specialized construction labor. When that much money chases limited supply, prices rise. Case in point: in May, consumer
prices for software and accessories were up about 15% from a year earlier, while wholesale prices for electronic components and accessories rose about 27%. The cost pressures are not limited to tech hardware. Wages for electrical and wiring-installation contractors were up 6.5% from a year earlier, versus 3.6% for all private-sector workers. Data centers are also expected to account for nearly half of U.S. growth in power demand through 2030, adding another source of upward pressure on electricity costs. AI may eventually boost productivity and lower inflation. But for now, it looks more likely to keep inflation firmer than many investors hoped.
Gold’s Recent Declines Offer a Good Reminder: It Isn’t a Reliable Inflation Hedge
Considering the inflation story above and recent hot readings tied to energy, one might expect gold to be holding up, given its mythical status as a reliable inflation hedge. Only it hasn’t. Gold’s recent slide is a useful reminder that the metal does not move in any simple, reliable lockstep with inflation or uncertainty. Indeed, inflation is still elevated, with May PCE running at 4.1% year over year. 2026 has also hardly lacked for geopolitical stress. Yet gold still fell below $4,000 an ounce this week for the first time since November, after hitting a record near $5,595 in January. That leaves bullion down roughly 29% from its peak despite exactly the sort of backdrop many people assume should favor it. In our view, the point is not that gold never rises during inflationary or uncertain periods. It is that those relationships are inconsistent and far less dependable than gold’s reputation suggests. In the short run, bullion tends to be driven by a messy mix of interest-rate expectations, dollar strength, investor sentiment, and positioning. This time, a hawkish Fed and stronger dollar appear to have mattered more than inflation fears. That helps explain why gold can disappoint investors who treat it as a straightforward hedge. It is still a commodity, and commodities can be volatile and sentiment driven.
Despite All the Tariff and Geopolitical Noise, Trade Continues Apace
A little over a year on from “Liberation Day,” and we are pleased to report that fears of a global reordering of trade were overblown. World trade flows rose in April, with the volume of goods moving across borders up 0.7% from March after a 2.3% decline the prior month. That may not sound dramatic, but it is another sign that global trade has remained surprisingly resilient despite tariffs, shipping disruptions, softer business confidence, and lingering fallout from the conflict in the Middle East. Part of that resilience appears to reflect businesses building inventories to get ahead of possible supply disruptions and higher costs. But a more durable support has been the continued boom in AI-related investment, which is helping drive trade in semiconductors, servers, and other electronic equipment. All told, world trade increased 4.2% in 2025 despite widespread expectations that tariffs and geopolitical tensions would drag more heavily on cross-border activity. The strength appears to have carried into this year as well, even with periodic setbacks. For investors, that is the key takeaway. Trade is not booming in a straight line, and conflict-related disruptions are still a real risk, especially for commodity flows. But the global system has so far proven more adaptable than many feared. AI-related demand, improved trade policy conditions, and businesses’ ability to reroute or rebuild inventories have all helped cushion the blow.
REFERENCED ARTICLES:
- Wall Street Journal. June 24, 2026. https://www.wsj.com/economy/the-data-center-boom-is-sparking-a-third-wave-of-inflation926adc6e?mod=economy_lead_pos2
- Financial Advisor. June 24, 2026. https://www.fa-mag.com/news/gold-breaks-below--4-000-as-multi-year-rally-grinds-to-a-halt87514.html
- Fred Economic Data. June 26, 2026. https://fred.stlouisfed.org/series/GVZCLS
- Wall Street Journal. June 25, 2026. https://www.wsj.com/economy/trade/world-trade-rose-in-april-in-fresh-sign-of-resilience7765597b?mod=economy_feat1_global_pos1
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