Iran's Attack on Cargo Ship Tests Ceasefire Deal, Fed Keeps Rate Hike Option Open

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Summary:

Iran's attack on a cargo ship tests Trump's agreement to restore navigation through the Strait of Hormuz; U.S. May PCE inflation rose above 4% year-on-year, leaving the Federal Reserve with the option to raise interest rates...

Highlights

1. Iran's attack on a cargo ship tests Trump's agreement to reopen navigation through the Strait of Hormuz.

2. As the U.S. midterm elections approach, media reports reveal Elon Musk's major donations to Republicans.

3. Israel's withdrawal from southern Lebanon remains a key Iranian red line.

4. Shipping through the Strait of Hormuz has recovered to nearly 60% of pre-conflict levels.

5. Israel and Lebanon are nearing a preliminary understanding.

6. Williams: Interest rates are expected to remain unchanged in the near term, with inflation projected to reach the 2% target by 2028.

7. Goolsbee: Inflationary pressures remain too high.

8. U.S. May PCE inflation exceeded 4% year-on-year, keeping the Fed's rate hike option on the table.

Details

Iran's Attack on Cargo Ship Tests Trump's Strait of Hormuz Agreement

Two senior U.S. officials said Iran's Islamic Revolutionary Guard Corps attacked a Singapore-flagged cargo vessel in the Strait of Hormuz on Thursday, putting last week's U.S.-Iran ceasefire agreement—which included restoring navigation through the critical shipping lane—to the test.

The United Kingdom Maritime Trade Operations (UKMTO) said the attack damaged the vessel's bridge but caused no casualties. The incident occurred near the coast of Oman, only hours after Iran's paramilitary naval forces warned ships not to use sea lanes through the Strait that had not been approved by Tehran.

The White House has not commented on the attack or its potential impact on the agreement. According to vessel-tracking platform MarineTraffic, the cargo ship Ever Lovely had previously loaded cargo at Iraq's Umm Qasr Port and was bound for Singapore. The vessel had reportedly been stranded in the Persian Gulf for more than 100 days. Early Thursday morning local time, it headed toward the entrance of the Strait, while three other vessels also attempted to transit at roughly the same time.

Musk Emerges as Top Republican Donor Ahead of U.S. Midterm Elections

According to an analysis of Federal Election Commission data by The Washington Post, major political donors have contributed more than $1.3 billion so far this election cycle as the U.S. midterm elections approach. Most of the funding has favored Republicans and could prove critical to the party's effort to retain control of Congress in November.

During the first half of 2026, Republican-leaning donors contributed $880 million, compared with $290 million from Democratic-leaning donors, while bipartisan and special-interest groups contributed $200 million. Newly minted trillionaire Elon Musk ranked as the largest individual donor, contributing $85.1 million to Republican organizations and candidates.

Israeli Withdrawal from Southern Lebanon Remains a Key Iranian Red Line

A source close to the negotiating team said Israel's withdrawal from Lebanese territory is one of the conditions for a final agreement between Iran and the United States and is regarded by Tehran as a critical red line.

The source added that the final memorandum of understanding would safeguard Lebanon's sovereignty and territorial integrity. The agreement previously reached in Switzerland already emphasized a unified conflict-resolution mechanism involving Iran.

Iran is now monitoring the implementation timetable. The source also noted that Israeli strikes on Lebanon have declined significantly over the past six days, suggesting Iran's efforts have had an impact. However, Tehran will not be satisfied unless a permanent ceasefire is achieved and Israel fully withdraws from Lebanon.

Strait of Hormuz Traffic Recovers to Nearly 60% of Pre-Conflict Levels

S&P Global Commodity Insights reported on June 25 that 78 vessels transited the Strait of Hormuz on June 24, marking the highest daily traffic since the outbreak of the Iran conflict.

Average daily vessel traffic this month has recovered to about 57% of pre-conflict levels. As of June 24, a total of 551 vessels had passed through the Strait during the month, putting June on track to become the busiest month since hostilities began.

The report noted that vessels leaving the Strait recently included both ships that had been stranded during the conflict and newly arriving vessels, indicating early signs of normalization in maritime activity. However, whether the recovery in shipping traffic can be sustained will depend on further implementation and consolidation of the relevant agreements.

Israel and Lebanon Near Preliminary Understanding

U.S. Secretary of State Marco Rubio said President Trump has multiple options if negotiations with Iran fail. He added that Washington is closely monitoring developments involving Israel and Lebanon, noting that yesterday's talks went very well and that the two sides are close to reaching a preliminary understanding.

Rubio said the United States seeks constructive dialogue with Iran and hopes to reach a final agreement, but not at any cost. He also stressed that no country has the right to charge transit fees in the Strait of Hormuz, arguing that such a system is fundamentally unworkable.

Regarding Iran's support for proxy groups, Rubio said the memorandum of understanding includes commitments not to interfere in the internal affairs of other countries, adding that the United States is focused on Iran's actions rather than its rhetoric.

Williams: Rates Likely to Stay Unchanged in the Near Term; Inflation Seen Reaching Target by 2028

New York Fed President John Williams said on Thursday that inflation remains unacceptably high, but current interest rate levels are sufficient to guide inflation back to the Federal Reserve's long-term 2% target.

He noted that inflation continues to be driven by multiple factors—including tariffs, energy prices, and artificial intelligence investment—and is expected to ease to 3.5% by the end of this year before gradually declining to 2% by 2028.

Williams said the current monetary policy stance is appropriately restrictive, but given the persistence of multiple risks, interest rates are likely to remain unchanged in the near term.

Goolsbee: Inflation Pressures Remain Elevated

Chicago Fed President Austan Goolsbee told CNBC on Thursday that although the latest U.S. inflation report showed some encouraging signs of easing in services inflation, underlying inflationary pressures remain too high and continue to be a concern.

Goolsbee declined to comment on whether the Fed should raise rates or keep them unchanged. He said he agreed with Fed Chair Warsh's view that policymakers should avoid encouraging excessive speculation about the future path of interest rates.

U.S. May PCE Inflation Exceeds 4%, Leaving Rate Hike Option Open

Rising energy prices driven by tensions in the Middle East pushed U.S. inflation higher in May, with headline inflation exceeding 4% year-on-year for the first time in three years, potentially keeping another Federal Reserve rate hike in play this year.

The U.S. Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) Price Index rose 4.1% year-on-year in May, the largest increase since April 2023 and the first reading above 4% since then.

Excluding food and energy, the core PCE Price Index increased 3.4% from a year earlier, marking the strongest gain since October 2023.

Following the release of the inflation data, markets continued to expect the Fed to leave interest rates unchanged in July while pricing in a possible rate hike in September.

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