BlackRock is closely monitoring the upcoming CPI report on Wednesday as an initial gauge of how tensions between the U.S. and Iran are contributing to already high prices in the economy. What to know: — BlackRock is paying particular attention to the May U.S. inflation report as a crucial indicator of how the U.S.-Iran conflict and associated energy crisis are influencing persistent price levels. — Economists predict a 4.2 percent year-over-year increase in the consumer price index, marking the fastest growth since April 2023 and significantly above the Federal Reserve’s 2 percent target, which raises the likelihood of additional interest rate hikes. — Prolonged high borrowing costs could intensify downward pressure on cryptocurrencies, including bitcoin, while an extended closure of the Strait of Hormuz poses the risk of a sharper inflation spike driven by energy as U.S. oil inventories approach four-decade lows. BlackRock is intently observing the May U.S. inflation report for its first clear indication of how the U.S.-Iran conflict is impacting persistent price levels. «We are looking at May’s U.S. inflation data for a clearer insight into the effects of the Mideast conflict’s energy shock on already stubborn inflation. The full extent of the shock is yet to be revealed and will depend on its progression,» stated the BlackRock Investment Institute in its weekly market analysis. The U.S. consumer price index (CPI) for May is set to be released on Wednesday at 08:30 am ET. Economists surveyed by Reuters anticipate a year-on-year CPI increase of 4.2%, the largest rise since April 2023, up from 3.8% in April. This expected uptick serves as a further reminder that inflation remains persistently above the Federal Reserve’s 2% goal, strengthening the likelihood that the Fed’s next action could be a rate hike instead of cuts, as markets had anticipated earlier this year. Increased borrowing costs typically discourage investment in riskier assets, including cryptocurrencies. In simpler terms, the predicted CPI rise could amplify bearish sentiment in the crypto market. Bitcoin has already faced a significant decline last week, dropping nearly 14% to below $60,000. A significant risk factor highlighted by BlackRock is the potential for an extended closure of the Strait of Hormuz extending into July. Such a disruption would elevate the energy crisis in the inflation conversation, especially as U.S. oil reserves could reach their lowest levels in forty years. «We believe that a prolonged closure of the Strait of Hormuz into July could bring the shock’s impact to the forefront of inflation dynamics, particularly as U.S. oil inventories may hit four-decade lows,» the firm noted.