Holiday Interruptions and Optimism about a Deal to Open the Strait of Hormuz
May 25, 2026
(138) U.S. and British financial markets will be closed for Memorial Day and the late spring bank holiday, respectively. While many other European countries will be observing Whit Monday, the major stock markets are open.
President Trump keeps dangling the prospect of a coming deal with Iran to end the war, reopen the Strait of Hormuz and bring down energy costs. The missing link is that for now apparently, officials aren’t discussing specifics regarding Iran’s nuclear weapons program, whose dismantling after all was the primary motivation of the original attack on Iran by the United States and Israel. Also unclear at this point is the status of Israel’s occupation of southern Lebanon.
Like last week, nonetheless, financial markets appear to be giving peace hopes a chances. That means a softer dollar, lower oil prices, reduced long-term interest rates, and higher equity and precious metal prices.
Compared to closing levels before the weekend, the dollar is down by 0.6% against the kiwi, 0.5% against the Korean won, 0.4% relative to the Mexican peso, New Zealand dollar and sterling, 0.3% vis-a-vis the euro, 0..2% against the yen and Swiss franc and 0.1% against the Canadian dollar.
West Texas Intermediate crude oil at $91.61 has fallen 5% overnight and from $108.66 per barrel just a week ago.
Ten-year sovereign debt yields have sunk 10-12 basis points in Germany, France, Italy, Spain, Mexico and the Netherlands and by 5 basis points in Japan.
Stock market gains today amount to 2.9% in Japan, 3.3% in Taiwan, 1.4% in India, 1.0% in China and 0.9% in Hong Kong. Share prices so far in Germany, France, Italy and Spain are each so far more than 1.0% stronger.
Silver and gold prices have strengthened 2.6% and 0.9%. Bitcoin’s rise of 0.3% has trailed.
Today’s light data release menu will be followed by a heavy flow later in the week. Meanwhile, the impact of the Iran war on prices has been much more pronounced at the wholesale than consumer price level.
- Producer prices in Malaysia last month leaped 3.2% on month, pulling up the 12-month rate of change to an increase of 5.4% (a 44-month high) from 1.1% in March, -3.4% in February and as depressed at -4.8% in mid-2023.
- Finnish producer price inflation of 4.6% last month was the most in 38 months and up from -0.8% last December and -10.0% in September 2025.
- In Latvia, producer price inflation has climbed to 0.9% from -0.8% in February and -11.4% at the end of 2023.
- Consumer price inflation in Singapore of 1.8% in both March and April, however, was just a half percentage point above the pace in the first two months of this year, and core CPI of 1.4% in April remained aligned with the 1Q pace.
The policy interest rate of the Bank of Israel as expected has been lowered by 25 basis points today. This was the fourth such cut since the start of 2024 but only the first since this past January. At 3.75%, the new interest rate level is its lowest since September 2o23. The central bank’s statement explaining the latest cut does not primarily ascribe the move to war developments. “Geopolitical uncertainty remains significant.” Instead, officials note a strong rise of more than 8% in the shekel against the dollar since the last rate reduction is noted, and so too is the fact that CPI inflation of 1.9% remains in the middle of its 1-3% target range.
Consumer confidence in Brazil slid marginally in May to a 2-month low and more sharply in the Czech Republic to an 8-month low. Czech business sentiment was also weaker this month, printing at a 4-month low.
Turkish economic sentiment rose 0.8 index points to a 2-month high this month.
Mexico’s trade balance swung to a $3.5 billion surplus in the first third of 2026 from a $4.0 billion deficit a year earlier.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Bank of Israel
ShareThis
