US Markets React to Higher-Than-Expected CPI and Middle East Tensions

Financial markets experienced moderate risk-off sentiment following an upside surprise in U.S. inflation, with the CPI data coming in slightly higher than expected at 3.7% year-over-year, primarily driven by energy prices. The dollar strengthened against the euro, and markets modestly increased the probability of a Federal Reserve rate hike in October to approximately 32%. Despite an initial sell-off, U.S. Treasuries recovered during the session, while European sovereign yields remained stable. Commodity prices also rose after a new attack in Saudi Arabia.