Market analyst Tom Lee warns of a major disconnect in oil markets: futures lag behind surging physical prices as geopolitical strife cripples supply. The closure of the Strait of Hormuz-following U.S. and Israeli actions against Iran-has slashed Middle Eastern production, per the International Energy Agency. Instability in Iran and the Black Sea region adds further uncertainty.
This energy crunch is fueling inflation fears, which could keep the Federal Reserve from cutting rates after its June or July 2026 meetings. Prediction markets currently peg the chance of a rate cut in June at just 2.5%, while July shows an 88.5% probability of no change. Meanwhile, Ethereum appears resilient, trading at 100% odds of staying above $1,800 on May 5.
Traders should watch upcoming Fed meetings and economic data for signals on the central bank's inflation assessment. The energy supply situation in the Middle East remains the key wildcard.