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BLOG — June 18, 2025
Markets were focused on geopolitical developments in the Middle East last week. Israel's attack on Iran on June 12 led to declines in equity values and bond prices, accompanied by rising Treasury yields, while oil and gold prices surged alongside a strengthening US dollar.
In mainland China, the consumer price index (CPI) fell by 0.1% year-over-year for the third consecutive month in May, while the producer price index (PPI) recorded its worst deflation since mid-2023 at 3.3% year-over-year, reflecting prolonged deflationary pressures.
In the US, the CPI and PPI for final demand both edged up by 0.1% in May, with minimal signs of tariff-induced price hikes. The Federal Open Market Committee (FOMC) is set to meet this week, and S&P Global Market Intelligence maintains that the policy rate will remain unchanged despite soft inflation readings.
Overall, market sentiment will continue to be influenced by geopolitical developments and changes in trade policy, with this week’s US data releases on retail sales, industrial production, and housing starts expected to provide indications into the impact of tariffs on commodity prices and demand.
The MPI increased by 1.1% last week, the first rise in four weeks. The increase was broad, with eight of the ten subcomponents rising. The MPI is approximately 9.8% lower than it was the same week a year ago, indicating a general easing in commodity prices over the past 12 months.
Energy markets were the key driver of the aggregate MPI last week, with the sub-index increasing by 2.4%, primarily due to a rally in oil prices. West Texas Intermediate Crude Oil, the US benchmark, rose by 6.3% to a weekly average of $68.10 per barrel, marking the largest weekly gain since April 2023. This spike was largely influenced by developments in the Middle East following Israel's military actions against Iran.
Market sentiment reflected heightened fears of a broader regional conflict that could affect Iranian oil infrastructure and supply routes, potentially leading to disruptions in oil supplies.
Natural rubber prices also saw a significant increase, with the sub-index rising by 2.5%. Prices on the Singapore Exchange averaged 215.7 US cents per kilogram, up from 210.4 US cents the previous week, supported by the strong rally in crude oil. The price rally was further fueled by increased optimism regarding mainland China’s automotive market, as data from the China Association of Automobile Manufacturers (CAAM) indicated a 13.3% year-on-year increase in passenger vehicle sales in May 2025.
—By Yan Hoong
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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