Oil Prices Climb

Rising tensions in the Middle East pushed oil prices higher this week, renewing concerns that inflation could remain stubborn. The latest economic data had little impact on financial markets, and mortgage rates finished the week near their highest levels in roughly one year.

The latest home building data contained mixed news. In June, overall housing starts jumped 19% from May, more than expected. However, this was driven entirely by volatile multi-family units, while single-family starts declined for the third straight month. Single-family building permits, a leading indicator of future construction, fell to the lowest level since August 2025. A survey of home builder sentiment on housing market conditions from the NAHB unexpectedly dropped to 34 and has remained in negative territory below 50 for twenty-seven straight months. To help generate demand, 63% of builders offered sales incentives in June, while 37% reduced home prices. Builders continue to cite rising land, labor, and material costs as the biggest obstacles to increasing new home supply.

In the latest reading, the number of Americans seeking unemployment benefits for the first time unexpectedly dropped to just 187,000, the lowest level since the 1960s. Weekly jobless claims are important because they are one of the timeliest indicators of labor market trends. While other recent economic reports suggest that companies may be scaling back on hiring new employees, this report indicates that they remain reluctant to lay off workers.

Bottom Line: Inflation concerns remain elevated as energy prices rise, mortgage rates continue to hover near one-year highs, housing inventory remains constrained, and builders face ongoing affordability and cost challenges. At the same time, the labor market continues to show resilience, reinforcing expectations that interest rates could remain higher for longer.

Looking ahead, attention will remain on the conflict in the Middle East and the proposed deal to ease tensions. The next Fed meeting will take place on Wednesday. No change in rates is expected, and investors will be closely analyzing the commentary for clues regarding future policy adjustments. For economic reports, Consumer Confidence will come out on Tuesday. Second quarter GDP, the broadest measure of economic activity, and the PCE price index, the inflation indicator favored by the Fed, will be released on Thursday.