Weekly commentary – For the week ended June 20, 2025

Oil prices fluctuated more than usual last week following a ratcheting up of tensions in the Middle East.

The conflict ramped up when Israel announced strikes on Iran on Friday, June 13, citing concerns about Iran’s nuclear development program.

Since then, rounds of missiles have been exchanged between the two sides, creating deep concerns about broader regional instability.

Oil price volatility was partially in response to concerns about oil supply disruptions through the Strait of Hormuz. Roughly a fifth of the world’s oil passes through the Strait.

Oil prices were volatile over the week, as markets also responded to hopes that the conflict would be managed and controlled.

In terms of the U.S. reaction to the conflict, President Trump commented that “nobody knows” what the U.S. response would be, which compounded uncertainty last week.

However, President Trump later suggested that negotiations were important and a decision would be made in the next two weeks.

Brent crude oil prices have risen roughly 10% since the conflict began.

The G7 summit took place in Alberta, Canada, last week, hosted by Prime Minister Mark Carney.

Even though President Trump left the summit early, Canada and the U.S. agreed to work towards a trade deal within 30 days of the summit.

Much of the negotiation could focus on the critical steel and aluminum industries, with Canada being the largest foreign supplier of these materials to the U.S.

Reaching a consensus among world leaders and international trading partners is notoriously difficult, so the agreements are likely viewed as strong diplomatic wins.

President Trump and U.K. Prime Minister Keir Starmer settled on a trade deal to reduce tariffs on U.K. automotive vehicles to 10%.

The agreement extended to aerospace products, but information about a possible deal for the steel and aluminum industry was held back.

Both leaders emphasized how important it was to protect the vital sectors of their respective economies.

Total exports from the U.K. to the U.S. have already been impacted by tariffs. According to the U.K. Office of National Statistics, exports to the U.S. fell by around two billion pounds from March to April, the largest decrease on record.

The U.S. Federal Reserve Board (“Fed”) voted to hold interest rates steady at 4.25%–4.50% at its June meeting.

Despite pressure from the U.S. administration to lower interest rates, the Fed continued its wait-and-see approach to rate cuts.

There have not been any rate cuts since President Trump took office.

The conflict in the Middle East has been an unpredictable factor for the Fed to work into the economic assessment.

Fed Chair Jerome Powell acknowledged that inflation has been moderating. Inflation has eased considerably from its peaks. But near-term inflation expectations have ticked up, with survey respondents pointing to tariffs as the source of higher prices.

Powell also noted that the labour market is broadly in balance and around maximum employment. These conditions should not be inflationary.

Labour market conditions remained solid, with average job gains of 130,000 per month over the past quarter.

Fed policymakers still anticipate 50 basis points worth of rate cuts in 2025.

Sales at retail stores and restaurants slipped by 0.9% in May, according to the Commerce Department.

Sales of automobiles dropped notably. These sales had been much higher in March as U.S. consumers bought ahead of the U.S. tariffs on imported cars.

Sales at home and garden centres fell by over 2.5%. The data suggests that U.S. consumers are slowing their spending.

U.S. consumer prices rose by 2.4% in May year-over-year, which suggests that the impact of tariffs is still working its way through to the end user.

Several major retailers in the U.S., including Walmart, have indicated they plan to raise prices in response to tariffs.

Sales at online retailers were more positive in May, increasing by 0.9%. Sales at clothing and furniture stores also increased.