Reports of Hormuz Traffic Drive Oil and Rates Lower, Supporting an Equity Recovery: May 20, 2026

Stocks are on track to break their three-day losing streak on reports that supertankers are moving through the Strait of Hormuz. The welcome traffic along the critical waterway is strengthening confidence that a resurgence in hostilities may not occur. Oil prices, yields and the greenback are plunging on the news, providing much needed breathing room for equities that were battered by soaring interest rates worldwide in the past few days. The fixed-income losses were caused by heavy inflationary pressures, ongoing economic growth, stable labor conditions and expanding defense expenditures that are widening government budget deficits. Today’s investor enthusiasm is most present in technology as Wall Street gears up for a pivotal earnings report from Nvidia after the bell, which will provide evidence on the runaway ahead for artificial intelligence and semiconductors as a whole. Risk-on sentiments are dominating trading so far this session, with participants scooping up shares across most sectors while dropping volatility protection instruments in light of offensive positioning. Commodities are mixed, with the cyclical ones retreating in aggregate while precious metals and copper catch bids.

Trump Put Bolsters Treasurys

With yields jumping violently in the past few weeks amidst an unresolved Middle East crisis and elevated oil prices, the macroeconomic consequences of much higher rates would have been significant absent imminent relief. Indeed, one of the key goals of the White House has been reduced pain at the pump and lighter interest expenses intended to improve affordability dynamics, but the Iran war has derailed those objectives. Furthermore, the recent inflation is even pressuring new leadership at the Fed to lift borrowing costs ahead of the midterm elections in November. Such a move by the Fed would likely be detrimental to the Republican party ahead of the pivotal mid-term elections. Finally, an effort to reverse the surge in energy charges accompanied by tightening credit conditions is bolstering Treasury performance here, as the Trump put arrives to strengthen the economic outlook while reducing Fed hike expectations.

International Roundup

China Holds Key Interest Rates

China’s central bank, the Peoples Bank of China (PBOC), decided to hold its key loan prime rates (LPR). The decision means one-year and five-year LPR rates will continue at 3.00% and 3.50%, respectively. China’s first-quarter gross domestic product grew 5%, which is giving the PBOC some flexibility with maintaining, rather than cutting, the two benchmarks. On the flip side, the organization recently warned that higher oil prices are likely to fuel inflation.

Annual UK Inflation Eases, Falls Below Expectations

UK inflation slowed in April with the Consumer Price Index (CPI) climbing 2.8% year over year (y/y) and 0.7% month over month (m/m), according to the Office for National Statistics. The monthly rate matched March’s pace but the annual rate was down from 3.3%. April’s results were also lower than the economist consensus expectations for y/y and m/m headlines of 3% and 0.9%. The CPIH, which includes owner occupiers’ housing costs, climbed 3% y/y and 0.8% m/m after March’s 3.4% and 0.6% ascents. April’s result was the lowest since March 2025. When excluding energy, food, alcohol and tobacco, the resulting Core CPIH was cooler, climbing 2.8% y/y following March’s 3.3% gain. Within the overall CPIH, the broad services category climbed 3.4% y/y, down from 4.3% in March. Goods’ price pressures, however, intensified with a 2.4% y/y increase following the preceding month’s 2.1% climb. The easing y/y price pressure resulted from inflation slowing in the following categories:

• Housing and household services climbed 3% following March’s 4.3% gain. Electricity and gas became less expensive as a result of price cap changes.
• Food and non-alcoholic beverages became 3% more expensive after a 3.7% March hike.
• Price pressures also decelerated for health care costs and the alcohol and tobacco category with April’s rates of 2.4% and 2.8% falling from 3.1% and 3.3%.
• The communications category and the restaurants and hotels classification moved in the other direction with y/y hikes of 4.1% and 4.4%, accelerating from March’s 4% and 3.1% jumps.

Energy Costs Push UK Input and Gate Prices Above Estimates

While the CPI depicts consumers catching a break on inflation, energy costs are pushing up UK factory gate and input costs. Output prices were elevated, rising 4% y/y and 1.4% m/m last month, exceeding estimates for 2.8% and 1%. Input prices were also considerably hotter than anticipated, rising 7.7% y/y and 2.4% m/m compared to the economist consensus estimates of 5.9% and 1.2%. Rising oil costs had the largest impact on both input and output costs. Regarding gate stickers, all 10 product groups became more costly with coke and refined petroleum products ascending by 52.6% following the 23.7% y/y hike in March. Input price hikes were led by crude petroleum and natural gas soaring 75.4% y/y.