After a week dominated by geopolitics, markets now face a number that will decide what happens next
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All week, the focus has been on Iran.
The war.
The ceasefire.
The uncertainty around whether that ceasefire holds.
But tomorrow morning, something else takes centre stage.
The March CPI report.
And it could move markets just as much.
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What CPI Actually Is
CPI stands for Consumer Price Index.
It is the government’s monthly measure of inflation across the economy.
It tracks changes in prices across key categories:
• Food
• Energy
• Housing
• Transport
In simple terms, it tells you how much the cost of living is rising.
It is the closest thing markets have to an official reading of inflation.
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Why This Report Is Different
Every CPI release matters.
This one matters more than most.
It is the first report that captures the economic impact of the Iran conflict and the closure of the Strait of Hormuz.
When the strait closed in late February:
• Oil jumped from $73 to over $110
• Energy costs surged
• Supply chains tightened
That feeds into the entire economy.
• Petrol prices rise
• Shipping costs increase
• Manufacturing becomes more expensive
• Food transport costs rise
Eventually, all of that shows up in inflation.
The last CPI reading in February came in at:
• 2.4% headline inflation
• 2.5% core inflation
That was before the shock.
Tomorrow, we see what five weeks of elevated oil prices actually did.
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What The Fed Is Watching
The Federal Reserve is trying to answer one question.
Can it cut interest rates this year?
At the start of 2026:
• Markets expected one or two rate cuts
Then the war happened.
• Oil surged
• Inflation risks increased
• The Fed held rates at 3.50 to 3.75%
And signalled no immediate cuts.
Tomorrow’s CPI report either reopens that conversation or shuts it down.
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Why This Is A Binary Event
The outcome is straightforward.
If inflation comes in higher than expected:
• Rate cuts become unlikely
• Interest rates stay higher for longer
• Borrowing remains expensive
• Stocks face pressure
If inflation comes in softer than feared:
• Rate cut expectations return
• Financial conditions ease
• Markets move higher
There is very little middle ground.
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The Key Number To Watch
The most important figure is core CPI.
This excludes food and energy.
Why that matters:
• Food and energy prices are volatile
• Core inflation shows underlying trends
There are two possible interpretations.
If core CPI is high:
• Inflation is embedded across the economy
• The oil shock is making an existing problem worse
If core CPI stays controlled while headline rises:
• Inflation is mostly driven by energy
• It could ease if oil prices fall
That distinction is critical for how the Fed responds.
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The Market Expectations
Current expectations sit around:
• Headline CPI at 2.7% to 2.9%
Key levels to watch:
• Above 3% → likely market sell-off
• Below 2.6% → likely market rally
The data is released before US markets open on Friday.
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Why Oil Still Matters
Even with the ceasefire, oil remains central to the story.
• Oil has dropped back below $95
• That could reduce inflation pressure going forward
But the situation is fragile.
If the ceasefire breaks down:
• Oil moves back toward $110
• Inflation risk rises again
• Rate cuts become less likely
Markets are watching this closely.
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Bottom Line
This week has been dominated by geopolitical headlines.
Tomorrow is about hard data.
The CPI report will show:
• How much damage the oil shock actually caused
• Whether inflation is rising again
• Whether the Fed can cut rates this year
It will shape:
• Market direction heading into Q2
• Interest rate expectations
• The strength of the current rally
