Apollo Economist Warns $74 Brent Drop Could Trigger Fed Rate Hikes
Updated
Updated · Forbes · Jun 24
Apollo Economist Warns $74 Brent Drop Could Trigger Fed Rate Hikes
3 articles · Updated · Forbes · Jun 24
Summary
Torsten Slok of Apollo said the Strait of Hormuz reopening and cheaper oil could now lift inflation by boosting demand in an already overheating U.S. economy, increasing the odds of Fed rate hikes soon.
Brent crude fell 4.3% to below $74, but Slok argued markets are reversing the usual view that lower energy prices ease inflation because April CPI ran at 3.8%, May inflation hit 4.2%, and May payrolls rose 172,000.
Energy has been the main inflation driver: the BLS said its energy index accounted for more than 60% of May price increases, with gasoline prices up nearly 59% from a year earlier.
The warning follows a U.S.-Iran agreement to reopen the strait, which carries about one-fifth of global oil supply, and will also allow more than 11,000 stranded seafarers to leave the Persian Gulf under new security guarantees.
Donald Trump separately said he told the Justice Department to examine oil companies for not cutting pump prices in line with the crude decline, while the Fed has already said inflation remains above its 2% goal.
Why could falling oil prices paradoxically force the Federal Reserve to raise interest rates?
With the Strait of Hormuz reopened, why will oil and goods shortages persist for months?
Oil Prices Plunge 4% After US-Iran Peace Deal: Paradoxical Inflation Risks and Fed Hawkishness in 2026
Overview
In June 2026, the signing of the US-Iran peace memorandum triggered a rapid and significant drop in global oil prices, as the war-driven risk premium quickly unwound. This was fueled by optimism that the Strait of Hormuz would soon reopen, allowing Persian Gulf oil exports to return to the global market. The expectation of increased oil supply led investors to anticipate a swift rebound in output, causing Brent crude prices to fall sharply. This immediate shift in the energy market highlights how geopolitical developments can quickly reshape investor sentiment and global commodity prices.