Iran ceasefire framework sends oil back to prewar levels, but markets still price in nearly two Fed rate hikes in 12 months

A U.S.-Iran ceasefire framework has reopened shipping through the Strait of Hormuz, sending crude back to pre-conflict levels and erasing nearly 70% of the past four months’ gains. Core PCE inflation is still expected to run at 3.4%, while an AI investment boom continues to underpin demand. Markets continue to price two rate hikes over the next 12 months, suggesting lower oil prices have not altered the expected policy path. The S&P 500 has kept rising on AI-driven momentum, appearing increasingly detached from moves in energy prices.