Edward Meir's week in review and thoughts for the week of May 25, 2026

Crude oil prices retraced late last week on growing optimism about the Iran war. Both Vice President JD Vance and Secretary of State Marco Rubio pointed to “some good signs” with the talks. Over the weekend, additional positive developments materialized. The Financial Times was the first to report on Saturday that “mediators believe they are edging closer to a deal to extend the US cease fire with Iran by 60 days.” And they apparently came to an agreement on other key points as well. Hours later, President Trump confirmed the report. A memorandum of understanding had been “largely negotiated,” Trump said, adding that the Strait of Hormuz would reopen.

From what we understand from Al Jazeera (which has good Iranian sources), the proposed framework would unfold in stages. At first, the parties would agree to formally end the war across all fronts. (That said, the Israelis will not accept to include Lebanon in any such arrangement.) The US would end its blockade on Iranian ports and withdraw American forces from the vicinity of Iranian territory. The Strait of Hormuz would be reopened under Omani/Iranian control. Neither would collect tolls.

At some stage, the US will waive partial sanctions on Iranian oil as well. The New York Times also reported that the draft agreement includes an “apparent commitment” by Iran to surrender its stockpile of highly enriched uranium. But this would be addressed at a later stage of the negotiations. A 30-day cease-fire would be in place and would be renewed by mutual agreement.

All this sounds promising. But our sense is this is going to be an intricate sequencing game. And it runs the risk of unraveling if one side or the other seeks to prioritize its concessions over those made to the other. We will have to see what happens.

The US bond market

Several markets reacted positively to the energy price declines we saw this past week. And we expect more enthusiasm this week as well given recent developments. In the US bond market, the 10-year treasury yield got to a fresh high of just under 4.69% last Tuesday. But it came off 13 basis points from that peak, ending the week at 4.56% (down four basis points for the week). The two-year settled up four basis points last week. We should see yields fall further once US trading gets underway on Tuesday. Why? Because lower oil prices will likely ease inflation fears.

Equities

In the US equity markets, lower oil prices helped the S&P 500 extend its winning streak to eight weeks as of Friday. The Dow ended 2.1% higher and set a fresh record high in the process. The drop in US treasury yields helped send real estate and construction names sharply higher. Financials also benefited. The NASDAQ underperformed last week. Despite relatively robust earnings posted by Nvidia, the index managed only a 0.5% increase on the week.

With 95% of companies in the S&P 500 now reporting Q1 numbers, earnings have so far been up by a massive 28% year over year (y/y). But much of the advance is attributable to only a few names and sectors, predominantly in the AI and chip space. Still, the earnings growth has lowered some of the forward PE multiples on the S&P 500. That keeps stocks from approaching bubble-like territory, at least for now.

Over the next several weeks, more companies are going to go public, including Open AI and Space X. The result? The enthusiasm for equities will likely remain in place for a while longer. In addition, this weekend’s developments will give equities an initial boost going into Tuesday’s session as well.

Metals

In the LME base metals markets, zinc prices finished just about flat last week. Copper ended up by about 0.8%. Nickel and tin each rose by about 2.2%. Lead tacked on about 1.7%. The general dollar index pushed higher early last week after treasury rates spiked. But the dollar index came off toward week’s end to end just about flat. Nevertheless, the greenback’s steady tone was enough to pressure precious metals.

Gold and silver finished down by roughly 1% and 1.6%, respectively last week. Platinum and palladium fell by 2.3% and 5.1%. Gold will look especially vulnerable on the charts if it closes below key support at $4,500 per ounce. Gold breached this level several times last week on an intraday basis. But the complex still managed to close above it each time.

We expect both base metals and precious metals to open higher this week. The outlines of the US-Iran agreement should weaken the dollar and provide a considerable tailwind to both complexes. Aluminum might sit things out should supplies start flowing out in greater quantities.

Macro readings and other news from the past week

• Reuters cites data from shipping monitor Lloyd’s List that at least 54 ships transited the Strait of Hormuz last week, double the number from the week before. Two Chinese tankers laden with around 4 million bbl of oil, as well as a South Korean vessel, all made it through the Strait midweek. Although 54 ships a week is only a tiny fraction of the 140 ships that used to pass through daily prior to the conflict, it does show that at least some oil is managing to make its way through. Meanwhile, countries in the Persian Gulf region are feverishly at work trying to navigate logistical impediments that the blockades are causing. We are reading that an oil pipeline cutting through the UAE (and avoiding the narrow Strait) is now almost 50% complete and should carry a decent amount of crude once it is. In addition, there are reports of booming trucking traffic across the Middle East as land routes open to offset the paralysis at ports.

• The Atlanta Fed GDPNow model has the US economy growing by a whopping 4.3% in Q2. We suspect it will be heavily skewed by business spending on AI if the forecast materializes.

• Kevin Warsh was sworn in as Federal Reserve chair at the White House last week and will no doubt hit the ground running.

• The final reading for the University of Michigan consumer sentiment index for May dropped to 44.8, marking a new low. The key takeaway: consumers are concerned about rising costs and their ability to out-earn inflation. But at least for now, they have not noticeably cut back on spending. In fact, the historical correlation between spending and confidence is rather poor, and the latest data both bears this out yet again. Let’s hope that “disconnect” continues.

• In US housing news, pending home sales rose 1.4% month-over-month (m/m) in April (consensus 1.6%). Starts came in at 1.465 million (consensus 1.420 million), while permits clocked in at 1.442 million (consensus 1.380 million). Both sets of numbers showed broad-based weakness across all regions for both single-family starts and building permits. Separately, the NAHB housing market index rose to 37 in May (consensus 34) from 34 in April.

• The Conference Board’s leading economic index rose 0.1% in April after falling 0.6% in March.

• We had a series of “flash” manufacturing and service PMIs issued by S&P Global this past week. From the US, the manufacturing PMI came in at 55.3 vs. the prior reading of 54.5. The services PMI edged slightly lower, to 50.9 from the prior number of 51. Out of Europe, the Eurozone May manufacturing PMI clocked in at 51.4 (prior 52.2), while the service PMI remains deep in contraction territory, at 46.4 (prior 47.6). Germany’s May manufacturing and service readings came in at 49.9 and 47.8, respectively. Both French readings were below 50 as well. The French service PM dropped especially hard – down by almost four points from the month prior, to 42.9. India’s manufacturing PMI came in at 54.3 (last 54.7), while the service reading was about in line with last month, at 58.9.

• The European Commission (EC) said it sees the region’s economy slowing in 2026 – no surprise here given all that is going on. The Commission has GDP growth slowing to 0.9% in 2026 from 1.4% in 2025. For 2027, the Commission sees an increase to 1.2%. The EC also increased inflation forecasts to 3% for this year from a previous 1.9%. Prices should increase by 2.3% next year.

• The EU reached a provisional agreement on Wednesday to remove import duties on US goods as part of a deal reached with Washington last year. But the bloc reinforced clauses to suspend concessions in case President Trump reneges on portions of the agreement. The EU approval should — at least for now — postpone a threatened tariff increase to 25% from 15% that Trump was considering imposing on July 4. A final vote to confirm the deal is scheduled for mid-June in the European Parliament.

• Reuters reports that China’s Tsingshan Group has asked pig iron producers at its Weda Bay industrial park in Indonesia to cut nodular pig iron (NPI) output to save power for aluminum production. Indonesia continues to emerge as a growing aluminum supply source. Exports of unwrought and unalloyed metal from Weda reached about 158,000 tons in Q1 of 2026, up from 114,646 tons a year earlier.

• We had a number of key macro reports from China that did not make for inspiring reading. In this regard, April industrial production rose by 4.1% vs. a year earlier. But this was below the 6% expected and also below March’s figure of 5.7%. Moreover, much of the growth in industrial production and manufacturing came from state-owned enterprises and high-tech sectors. Chinese retail sales were up a meager 0.2% year-on-year, well below last month’s 1.7% reading, which itself was not particularly strong. Among some of the April retail sub-components, Chinese car purchases were down 10.6% y/y. Home appliances declined 4%. And construction materials were off 7.1%. In addition, Chinese fixed-asset investment fell 1.6% between January and April. Exports were the sole bright spot in an otherwise lackluster showing. “The oil shock has now arrived, and it is hitting the economy harder than expected,” Reuters quoted a Chinese analyst as saying.

• Reuters reports that China’s steel production in April fell 3.9% from March, the lowest April reading since 2018. In addition, the government announced steel “swaps” to reduce existing steel capacity. At least 1.5 metric tons of old steel capacity needs to be taken out for every ton of new capacity built. “By limiting future transfers mainly to substantive mergers and restructuring, Beijing is trying to tighten control over capacity allocation and push industry consolidation, especially among large state-owned steelmakers,” Reuters reports. However, this may not necessarily reduce output going forward as the new facilities will likely be much more efficient than the old ones they are replacing.

• The US auto market continues to shift toward hybrids and internal-combustion models as EV policy changes take hold. Elizabeth Krear of the Center for Automotive Research (CAR) said hybrids now account for 14.5% of US market share. Full battery EVs have fallen to 5.1% after peaking at 7.8% in 2024. Full-year 2026 light vehicle sales are projected to come in at 15.7 million units, roughly 300,000 below 2025 levels. Steel industry sources suggest that lower-priced vehicles are more likely to substitute steel for aluminum in fenders and hoods, which could help keep automotive steel demand close to last year’s levels.

This week’s US macro readings

It should be a fairly light week on the US numbers front at least until Friday.

On Tuesday, we get the S&P Case Shiller home price index for March, followed by May consumer confidence readings (expected at 92, last 92.8.)

Nothing comes out Wednesday. Thursday brings us weekly initial claims (expected at 213,000, last 209,000), April durable goods orders (expected at 3.3% last 0.8%), and April new-home sales (expected at 665,000, last 682,000).

Friday brings us a second revision to Q1 GDP (expected at 2%, unchanged from the previous estimate), along with April personal income (expected at 0.4%, last 0.6%) and April personal spending (expected at 0.5%, last 0.9%). We also get the April PCE price index Friday (expected at 0.5% m/m). The year-over-year reading is expected to come in at 3.8% (last 3.5%). Core PCE is forecast to come in at 0.3% m/m and is expected to come in at a 3.3% annual rate, 0.1% higher than the month prior. Chicago May PMI will also come out Friday (expected at 41, last 49.2).

We wish all our readers all the best for the upcoming week.