US Inflation Slows in June as Geopolitical Tensions Weigh on Markets

June Inflation Data and the Federal Reserve’s Policy Path

The U.S. Bureau of Labor Statistics reported that consumer prices fell 0.4% in June, marking the first monthly decline since the COVID-19 pandemic began, according to IG. Core inflation, which excludes volatile food and energy costs, remained stable on a monthly basis for the first time since January 2021, while the annual rate slowed to 2.6%—well below the 2.8% consensus forecast.

This cooling trend has significantly altered market expectations for the Federal Reserve. However, Fed Chair Kevin Warsh signaled that the central bank remains vigilant. During congressional testimony, Warsh emphasized that a single favorable report does not end the fight against inflation.

“Nous avons les outils nécessaires pour le faire. Au cours des prochaines semaines, je demanderai à mes collègues d’engager une bonne discussion sur la mesure et le moment où nous devons utiliser ces outils.”

Kevin Warsh, Chair of the Federal Reserve, via Sadanews

Geopolitical Volatility and the Energy Market

Despite the positive inflation news, market enthusiasm has been constrained by a resurgence of geopolitical risk. This shift followed the resumption of U.S. strikes in Iran, which sparked a sharp rally in crude oil prices.

The WTI crude benchmark, which traded near $67 earlier in the month, has seen volatility push prices toward $80 per barrel. Analysts at Sadanews suggest that because the latest inflation data does not fully account for the recent surge in energy costs, investors remain wary. Markets are balancing the relief of lower domestic inflation against the risk that persistent energy price shocks could force the Federal Reserve to keep interest rates higher for longer.

ASML and the Technology Sector’s Divergent Performance

While broad market indexes showed measured responses to the inflation data, the technology sector found support in strong corporate earnings. Boursorama reported that ASML, the global leader in semiconductor manufacturing equipment, exceeded quarterly expectations and raised its 2026 production forecasts. The company’s stock rose as much as 8% in Amsterdam, helping to buoy sentiment around artificial intelligence-linked equities.

This performance stands in contrast to other parts of the tech sector. IBM shares fell 25% following revenue guidance that missed analyst expectations. Ipek Ozkardeskaya, an analyst at Swissquote, noted that the current market divergence is driven primarily by tech stocks, which are once again outperforming broader benchmarks. In Asia, the KOSPI index surged 7% following the U.S. inflation report, reflecting a regional appetite for risk as Treasury yields eased.

Global Economic Indicators: China’s Slowdown

Beyond the U.S. inflation data, global investors are monitoring growth concerns in China. According to Boursorama, China’s economic growth slowed to 4.3% in the second quarter, a level below analyst projections. Economists attribute this to a combination of weak domestic demand and the aforementioned oil price shocks stemming from the conflict in the Middle East.

While the Chinese government has not announced a massive stimulus package, analysts expect targeted interventions to support technology-led growth. As markets look ahead, the focus remains on whether the current disinflationary trend in the U.S. will prove durable enough to sustain the recent rally in equities, or if geopolitical pressures will ultimately dictate the next move for global central banks.

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