BlackRock fears a rebound in inflation driven by oil

Donald Trump displays an offensive stance on the global chessboard. Yet, markets can no longer read his play. Doubt is settling everywhere in the world. Iran, oil running wild, and central banks on alert: the game is becoming very unclear.

The CPI that BlackRock watches like a poker hand

BlackRock, global investment giant, awaits the May CPI report as a decisive test. Economists anticipate an annual inflation of 4.2%. This would be the highest level since April 2023. It would move even further away from the 2% target set by the Fed. 

We await the U.S. inflation figures for May to get a clearer reading of the impact of the energy shock linked to the Middle East conflict on already persistent inflation.

BlackRock Investment Institute (CoinDesk)

Inflation is therefore not weakening despite appearances; it could even accelerate in the coming months. If oil rekindles the flame, the Fed will not hesitate to tighten the screws very hard.

The Strait of Hormuz, the artery that can strangle bitcoin

BlackRock plays an even more worrying card in this tight game. A prolonged closure of the Strait of Hormuz until July would turn a regional tension into a global energy shock. 

“We think a prolonged closure of the Strait of Hormuz until July could make the impact of the shock much more visible, especially if U.S. oil stocks reach their lowest levels in forty years” adds BlackRock (CoinDesk).

 Inflation would then become both logistical and geopolitical. Bitcoin has already absorbed a 14% drop in recent days. It recently even fell below 60,000 dollars. 

If energy prices rise again, the Fed will favor a rate hike. For BTC, that would be a new very painful blow.

Inflation dictates the law, ETFs no longer set the pace

ETF flows amplify the movements, but no longer trigger them in the market. Inflation now pulls all the strings. Weekly bitcoin ETF outflows have nevertheless reached 1.72 billion dollars. This impressive figure includes 1.34 billion for BlackRock’s IBIT alone. 

However, it is not this amount that made BTC plummet. It was the rate expectations that triggered everything. Hot inflation pushes real yields and the dollar up. Cold inflation, on the contrary, would reopen a relief window for risk assets. 

This week, a single figure can change everything in the markets. Traders know it well: they are playing very tight ahead of the release.

The data that bend the market

• U.S. inflation expected at 4.2%, unseen since April 2023;
• BTC price at 63,498 dollars as we write;
• Bitcoin ETF outflows over one week: 1.72 billion dollars;
• U.S. oil stocks at their lowest in forty years.

BlackRock sheds light on part of the global economic puzzle. However, inflation does not explain everything alone. Leveraged liquidations, massive ETF outflows, and changes in monetary expectations also played a major role in the recent bitcoin correction. One certainty remains: inflation is the true dealer at this global financial table.