Mixed Middle Eastern News But Investors Seeing the Cup Half Full
May 28, 2026
From a military standpoint, it doesn’t look like long-term peace in the Middle East is close at hand. The U.S. and Iran traded military strikes already this week, and the ceasefire between Israel and Lebanon is being repeatedly violated as well. Nonetheless, reports continue that Iranian and U.S. negotiators are close to a penciling a 60-day extended ceasefire that would foster renewed traffic through the Strait of Hormuz and address Iran’s nuclear program. Financial markets are showing faith in such deals even though long-time Middle Eastern experts see all sorts of scenarios in which the talks and promises could fail eventually.
The dollar’s retreat was extended today. Most equity markets in Europe and the Pacific Rim declined, but the SPX, Nasdaq and Russell 2000 were each up around a half percent as of noon. Although up 1.4%, the price of WTI oil is marginally under $90/barrel, and the retreat of ten-year sovereign debt yields have been extended by five basis points in the U.K., three bps in Germany, France, Italy, Spain and Switzerland, and by two basis points in the United States. At $72,797, the price of Bitcoin is down to its lowest levels since mid-April. Precious metal prices have drifted marginally lower.
One currency against which the dollar kept rising today has been the Indonesian rupiah in spite of a 50-basis point interest rate hike enacted by Bank Indonesia last week. A fresh record low of 17,921 per dollar was touched earlier today, and the rupiah currently sports a 0.2% net dip so far this Thursday.
Another expected monetary tightening done today occurred at the South African Reserve Bank, where the policy interest rate was raised for the first time since May 2023. The 25-basis point increase returned the interest rate to 7.0%, reversing the sixth and final cut of an easing cycle made last November. South African consumer price inflation has risen to 4.0%, the top of the central bank’s target range, and officials worry that the instant reaction from the Middle East war could trigger second-order price changes. Raising South Africa’s interest rate was not an easily reached choice, however, and two of the six policymakers voted to keep the rate at 6.75%.
Today’s other central bank interest rate decision at the Bank of Korea did opt for keeping such unchanged at 2.5%, the level since a cut in May 2025. South Korean CPI inflation printed at 2.6% last month.
Minutes from the European Central Bank’s governing council meeting on April 29-30 have a hawkish tone. The decision then not to raise interest rates was a difficult one for some committee members, and the group expressed a need for high alert against second-order inflationary dynamics. A rate increase appears to be a matter of when rather than whether.
Many U.S. economic indicators were reported today. Most importantly, the monthly personal expenditure price deflator accelerated to a 35-month high in May of 3.8%, which is what analysts were anticipating. Monthly increase of 0.4% overall and 0.2% excluding food and energy were smaller than in April, however, and that core uptick was fractionally less than forecast. The biggest surprise involved unchanged personal income growth, and the monthly rise in inflation-adjusted personal spending slowed also, printing at just 0.1%.
U.S. real GDP growth last quarter got revised downward from 2.0% at an annualized rate to 1.6%, mainly as a result of a smaller contribution from inventory changes and faster import growth than estimated initially. The PCE price deflator for the quarter accelerated to a 4.5% annualized advance relative to the prior quarter.
U.S. durable goods orders jumped 7.9% in April, far outpacing expectations, but orders for non-defense capital goods excluding aircraft, which are a good barometer of future business investment posted a 1.1% drop.
U.S. new home sales sank 6.2% in April, and new jobless insurance claims last week edged 3k higher to a still-low 215k.
Price data reported from other countries today included
- A 34-month high in French producer price inflation of 2.1% in April versus zero percent in March and -2.4% in February.
- A 38-month high in Italian PPI inflation of 6.8% following readings of 4.2% in March and -2.7% in February.
- Brazilian PPI inflation turned positive at 1.1% after readings of -1.6% in March and -4.4% in February.
- South African producer prices climbed 3.0% on month in April, resulting in a 2-year peak 12-month increase of 4.8%.
- Icelandic consumer price inflation exceeded the 5% threshold for a third straight month in May but, at 5.1% was below March’s 19-month high of 5.4%.
- Belgian CPI inflation of 4.1% was its highest in 16 months.
The euro area economic sentiment index bounced marginally above April’s 5-year low of 93.2 to a score of 93.5 in May, but the industrial sector was at a 5-month low. The readings for construction and retail were also worse than those for April. Services, measures of actual and expected price pressure, and employment were better.
Italian consumer confidence rebounded to a 3-month high this month, but manufacturing sector business confidence stayed at April’s 17-month low.
Swedish consumer sentiment hit a 2-month high in May, but business confidence edged a bit lower.
Canada’s current account deficit of C$ 7.2 billion last quarter was greater than forecast but smaller than the shortfall of C$ 36.5 billion a year earlier.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Bank of Korea, ECB minutes, Euroland economic sentiment, South African Reserve Bank, U.S. 1Q revised GDP, U.S. personal spending and PCE price deflator
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