The presidents of the US and Iran signed a memorandum of understanding yesterday to end the conflict between the two countries. The conflict began at the end of February and effectively closed the Strait of Hormuz, which is a critical waterway in the global supply of oil. The closure sent oil prices surging higher, raising fears of rising inflationary pressures and how it may impact the global economy. The strait will now be reopened with no fees for commercial ships for 60 days.

• As part of the deal, the Strait of Hormuz will reopen as the US and Iran begin a 60-day negotiation period to decide on Iran’s nuclear program.
• Along with restrictions on Iran’s nuclear program, the two sides will try to decide what to do to shed Iran’s enriched uranium.
• Comments from US President Donald Trump and other world leaders shared a theme of being hopeful oil prices would go down as the oil stuck in the area gets distributed around the world.
• Meanwhile, producer price growth in Canada slowed in May. Producer prices rose by 1.2% in May compared to 1.6% in April. Contributing to May’s increase was a rise in prices for energy products, albeit at a slower pace than the previous month.
• Statistics Canada will release consumer price data next week. Canada’s annual inflation rate jumped to 2.8% in April, mainly due to rising energy prices.

News the two sides were closing in on a deal sent oil prices lower in recent days, but they still stand above levels seen before the Mideast conflict began. Since the beginning of June, oil prices have declined from over US$90 per barrel to just over US$70/barrel yesterday. This could ease some pressure on consumers globally. Higher energy prices have already cut into discretionary spending here in Canada.

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