U.S.-Iran Memorandum of Understanding Eases Energy Shock as Warsh Drops Forward Guidance

Weekly Market Commentary | Week of Jun 22nd, 2026

A Recap of Economic and Financial Trends from the Prior Week

By: Michael Horvath, The Quinnipiac University Global Economics Research Team

Last Week in Review

• The U.S. and Iran signed a memorandum of understanding toward reopening the Strait of Hormuz, pushing oil prices sharply lower, while the Federal Reserve held rates steady but signaled possible hikes and dropped forward guidance in Chair Warsh's first meeting

• U.S. indexes closed the holiday-shortened week higher with the Nasdaq leading gains, as relief over the Iran agreement offset short-term Treasury yield spikes triggered by the hawkish Fed projections

• The Bank of Japan raised its policy rate to 1.0%, the highest since 1995, while China's retail sales fell year over year for the first time since 2022 and European markets advanced broadly on de-escalation optimism

Economic Recap

U.S. retail sales increased 0.9% in May, ahead of expectations and up from April's revised 0.4% increase, with control group sales rising 0.7%. Housing data were mixed, with housing starts dropping 15.4% to a seasonally adjusted annual rate of 1.177 million, while pending home sales rose 4.8% year over year, the fastest annual pace since November 2024. The Federal Reserve left rates unchanged at 3.50% to 3.75% but leaned hawkish, with nine of 18 officials penciling in at least one rate hike in 2026 and policymakers raising their inflation forecasts to 3.6% headline PCE and 3.3% core PCE for 2026. Chair Warsh dropped forward guidance and launched five policy task forces, creating the potential for greater interest rate volatility.

Internationally, the eurozone swung to a EUR 1 billion trade deficit in April, well below expectations for a EUR 7.8 billion surplus, while Germany's ZEW Indicator of Economic Sentiment posted its first positive reading since the start of the Middle East conflict. The Bank of England kept its base rate at 3.75% with UK annual inflation unchanged at 2.8% in May. In Japan, the Bank of Japan raised its policy rate by 25 basis points to 1.0%, its highest level since 1995, with exports rising 17.0% year over year in May. In China, industrial production rose 4.5% year over year while retail sales fell 0.6%, the first annual decline since late 2022, and property investment fell 16.2% year over year.

Market Recap

Source: JPMorgan Asset Management, “Weekly Market Recap” (June 22nd, 2026). (Chart © JPMorgan Asset Management. Chart used under fair use for educational commentary by The Quinnipiac Global Economics Research Team.)

U.S. indexes closed the holiday-shortened week higher as the U.S.-Iran memorandum of understanding pushed oil prices lower and lifted risk appetite broadly. The Nasdaq Composite led gains at 2.76% and is now up 14.43% year to date, while the S&P 500 rose 1.47% to 7,501 and is up 10.20% year to date. The Russell 2000 advanced 2.05% and is up 20.70% year to date. The Russell 1000 Value rose 1.24% and is up 16.05% year to date, continuing to substantially outperform the Russell 1000 Growth, which gained 1.46% and is up only 4.50% year to date. U.S. Treasuries generated negative returns as short-term yields rose sharply following the Fed meeting.

Internationally, MSCI EAFE gained 3.51% and MSCI EM surged 7.62%, now up 10.63% and 28.74% year to date respectively, reflecting strong relief rallies in energy-importing markets. The pan-European STOXX Europe 600 rose 0.62% in local currency terms, with Italy's FTSE MIB gaining 2.31% and Germany's DAX rising 1.59%. Japan's Nikkei 225 surged 7.62% to extend all-time highs, led by semiconductor equipment and AI-related technology stocks.

Market Themes

Energy Security Emerges as a Durable Investment Theme Beyond the Immediate Supply Shock

BlackRock Investment Institute argues that while the expected reopening of the Strait of Hormuz helped push oil prices lower, the disruption is a reminder that the world's energy system remains heavily dependent on a few critical bottlenecks, creating durable investment opportunities across two horizons. In the near term, the need to secure supply and reduce dependence on vulnerable routes is driving opportunities for fuel exporters outside the strait and for transport and storage infrastructure diversifying supply. Over a longer horizon, the challenge is meeting rising electricity demand driven by AI, electrification, and economic growth while balancing energy security, affordability, and decarbonization. BlackRock favors a selective approach focused on infrastructure and critical bottlenecks, preferring developed market supply chains and infrastructure assets positioned to benefit from energy security investment.

Warsh's First Fed Meeting Signals a Policy Regime Shift With Implications for Rate Volatility

Federal Reserve Chair Kevin Warsh's decision to drop forward guidance represents the most significant procedural shift in Fed communication in years. BlackRock Investment Institute notes this could reset the basis of all FOMC forecasts and result in more interest rate volatility going forward. Markets interpreted the updated Summary of Economic Projections as leaning hawkish, with nine of 18 officials penciling in at least one rate hike and median policymakers expecting modest tightening by year-end, a notable reversal from the March projections that had pointed to rate cuts. Headline PCE inflation is now expected to reach 3.6% in 2026, underscoring that price stability remains the Fed's primary concern heading into the second half of the year.

Chart of the Week

Source: BlackRock Investment Institute, with data from Bloomberg, "Bottlenecks Driving Returns: Performance of Selected Equity Power Sectors vs MSCI World, 2025-2026," June 2026. Notes: Gas turbines and fuel cells: Mitsubishi Heavy Industries, GE Vernova and Siemens Energy; Copper miners: STOXX Global Copper Miners Index; Clean energy: iShares Global Clean Energy ETF; Non-SoH LNG exporters: Cheniere Energy, Woodside Energy, Venture Global and Santos. Custom indices are equal weighted and rebased to 100 on Jan. 1, 2025. (Chart © BlackRock Investment Institute. Used under fair use for educational commentary by The Quinnipiac Global Economics Research Team.)

The chart plots the performance of four selected equity power sectors against the MSCI World from January 2025 through June 2026, with all series rebased to 100 at the start of 2025. Gas turbines and fuel cells have been the strongest performer over the period, rising to approximately 250 by mid-2026, driven by surging demand for power generation equipment tied to the AI data center buildout, industrial electrification, and rising cooling needs. Copper miners reached approximately 205, reflecting rising demand for the metal as a critical input across power infrastructure, grid expansion, and AI-linked construction. Clean energy advanced to approximately 190, supported by sustained investment in renewable power capacity and grid modernization. Non-Strait of Hormuz LNG exporters, which include Cheniere Energy, Woodside Energy, Venture Global, and Santos, initially underperformed the broader market before spiking sharply following the outbreak of the Middle East conflict in late February, as global buyers scrambled to secure LNG supply through routes bypassing the strait. All four sectors have materially outperformed the MSCI World over the full period, illustrating BlackRock's central argument that bottlenecks in the global energy system, spanning both near-term fuel supply security and the longer-term challenge of meeting surging electricity demand, are generating durable and differentiated investment opportunities that extend well beyond the immediate supply shock.

Market Outlook

BlackRock will focus this week on U.S. core PCE inflation data as the primary test of whether higher energy costs are feeding into underlying price pressures. Japan's CPI data will provide an update on whether inflation is sustainably moving toward the Bank of Japan's 2% target following the rate hike. Global flash PMIs will offer an early read on whether the U.S.-Iran memorandum of understanding and falling oil prices are beginning to relieve cost pressures across major economies. BlackRock maintains its overweight to U.S. and emerging market equities, stays underweight long-term U.S. Treasuries, and favors energy infrastructure and AI-linked exposures heading into the second half of 2026.

Calendar Events

Economic Data:

Jun. 23 (Tue): Global Flash PMIsJun. 24 (Wed): Japan Service PPIJun. 25 (Thu): U.S. Core PCE (May); U.S. Durable Goods (May)Jun. 26 (Fri): University of Michigan Consumer Sentiment (Jun final); Japan CPI

Major Corporate Earnings:

Jun. 23 (Tue): FedEx Corporation (Q4 2026)Jun. 24 (Wed): Micron Technology Inc. (Q3 2026)

Sources

J.P. Morgan Asset Management. "Weekly Market Recap PDF." J.P. Morgan Asset Management. https://am.jpmorgan.com/content/dam/jpm-am-aem/americas/us/en/insights/market-insights/wmr/weekly_market_recap.pdf

J.P. Morgan Asset Management. "Economic Update." J.P. Morgan Asset Management. https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/market-updates/economic-update/

T. Rowe Price. "Global Markets Weekly Update." T. Rowe Price Insights. https://www.troweprice.com/personal-investing/resources/insights/global-markets-weekly-update.html

BlackRock Investment Institute. "Weekly Investment Commentary: Powering Through Energy

Bottlenecks." BlackRock, June 22, 2026. https://www.blackrock.com/us/individual/literature/market-commentary/weekly-investment-commentary-en-us-20260622-powering-through-energy-bottlenecks.pdf

BlackRock Investment Institute. "Weekly Commentary Archives." BlackRock. https://www.blackrock.com/corporate/insights/blackrock-investment-institute/archives

Apollo. "The Daily Spark." Apollo. https://www.apollo.com/wealth/the-daily-spark

MarketWatch. "Economic Calendar." MarketWatch. https://www.marketwatch.com/economy-politics/calendar

Yahoo Finance. "Earnings Calendar." Yahoo Finance. https://finance.yahoo.com/calendar/earnings/