Higher energy costs are pushing up US rates

After surging in March and at the end of April, the price of crude oil has fallen from recent highs of around $120 per barrel. This occurred after President Trump announced on May 4 that the United States would begin escorting neutral ships through the Strait of Hormuz. There were also hopes that last week's meeting between Trump and China’s leader, Xi Jinping, would lead China to become more actively involved in mediating the Iran conflict. However, China's involvement has been largely symbolic substance thus far. Over the weekend, Trump issued new threats, stating that time is running out for Iran. 

Typically, nearly 20 percent of the world’s crude oil supply is shipped through the Strait. While some of it has been rerouted via land pipelines, the de facto closing of this passage continues to affect most of the supply from the region. Tanker traffic remains severely limited, and the double blockade by Iran and the U.S. is not helping. According to The Economist, nearly 14 million barrels of oil per day—14 percent of global output—have been lost. The U.S. strategy may be to force Iran to cut production as it runs out of storage space and then bring Iran to the negotiating table to make concessions. However, this strategy is risky because Iran might become desperate and launch more missile and drone attacks on other Gulf countries, thereby intensifying the conflict.  

In short, the fog of war persists, and there is no immediate positive solution to the energy crisis in the Strait of Hormuz. One reason the price of crude has not increased more in the short term is that. In recent years, China has quietly accumulated a large strategic petroleum reserve of 1.2 billion barrels as a defense against possible sanctions. However, the pace of drawdowns is probably high currently. In contrast, the scramble for oil in many other parts of the world will soon become even more intense. The full impact of the Strait closure remains to be seen, given the long shipping routes of oil tankers and the recent onset of the conflict at the end of February. 

In addition to news directly related to the conflict, the oil price seems to become more sensitive to inventory updates, such as those in the US, as well as possible export restrictions from oil-producing countries. Brent futures are trending positively, and this year's highs are a realistic near-term price target. However, it has to be noted a negative divergence with MACD and relative strength, suggesting that price momentum has faded somewhat.

In April 2026, the US Producer Price Index was 1.4% on a monthly basis and 6.0% on an annual basis, compared to expectations of 0.5% and 4.9%, respectively. The majority of this increase can be attributed to higher energy prices. On Friday, May 15, the US ten-year Treasury yield increased by 13 basis points, rising from 4.45% to 4.58% (see graph below). Rising interest rates pose a risk to S&P 500 and NASDAQ valuations.

On Wednesday 20 May, the Swedish companies Addtech and BioArctic, as well as the Norwegian companies Salmar and Orkla, will release their interim reports. However, most of the world is waiting for Nvidia's results though, which are expected to be published later on Wednesday. Turning to the macro statistics, starting with the UK's producer and consumer price index figures for April, the Eurozone will also release its April consumer price index. Finally, the US will release its weekly oil inventory figures from the Department of Energy.

On Thursday 21 May, an interim report from the Swedish investment company Lundberg is expected. In the US, companies such as Deere, Take-Two and Walmart will publish their interim reports. Thursday's macroeconomic news agenda will be dominated by the purchasing managers' index for May from Japan, India, France, Germany, the Eurozone, the UK and the US. The Japanese trade balance for April will also be expected, as well as machinery orders for March. From the Eurozone, a household confidence indicator for May is expected. The UK will present its CBI industrial trends for May. In addition to the aforementioned Purchasing Managers' Index, the U.S. will release data on housing construction in April, as well as the Philadelphia Fed Index and the Kansas Manufacturing Index in May, along with initial weekly jobless claims.

On Friday, May 22, the Norwegian company Frontline is scheduled to report its interim results. The release of macro statistics begins with Japan's April consumer price index. Next are the UK's retail sales for April. Germany will release the GfK consumer confidence index for June, the GDP for the first quarter, and the Ifo index for May. The U.S. will contribute the Michigan index for May.

The S&P 500 is showing signs of weakness, partly due to rising yields following the release of higher-than-expected core consumer inflation data. As the chart below shows, the index is currently trading below its EMA9, and the MACD has generated a soft sell signal. The MA20, currently at 5,290, is the first support level on the downside. The next area of interest is 5,150 should the MA20 breaks. 

Like the S&P 500, the NASDAQ-100 is trading below its EMA9 with the MA20, which is currently at 28,201 and represents the next meaningful support level on the downside. Beyond that, 27,200 comes into focus. As always, the trajectory of U.S. yields will be a key driver of the tech-heavy index.

The Swedish OMXS30 remains above its MA100, though momentum is clearly fading, as evidenced by the decline of the MA20 and the weakening of the MACD. Should the index lose its footing and falls below 3,040, the next logical target will be the psychologically significant 3,000 level. On the upside, a decisive move through the MA20 could open the door to the 3,150 area. Additionally,,  the symmetrical triangle forming on the chart is worth noting, as this pattern typically precedes a more substantial directional move. The direction of the eventual breakout will be telling.

In contrast, the German DAX is trading erratically, with momentum close to neutral. Flash PMI data from the Eurozone and Germany, scheduled for release on May 21, could introduce short-term volatility to the index. This data could provide insight into whether the industrial slowdown is deepening or beginning to stabilize. A break above 24,660 would be encouraging and could pave the way to 25,300. On the downside, slipping below 24,000 would bring the MA50, currently at 23,746, into focus. The next meaningful support level is around 23,365.

EMA 9: 9-day exponential moving average

Fibonacci: There are several Fibonacci lines used in technical analysis. Fibonacci numbers are a sequence in which each successive number is the sum of the two previous numbers.

MA20: 20-day moving average

MA50: 50-day moving average

MA100: 100-day moving average

MA200: 200-day moving average

MACD: Moving average convergence divergence