U.S. consumer prices jumped from 2.4% in February 2026 to 3.3% in March, driven partly by the Iran war's disruption of Strait of Hormuz oil flows.1 The shock rippled across global energy markets, pushing costs higher worldwide.
The Hormuz strait carries roughly 20% of global oil trade. Disruptions there hit importers from Japan and South Korea to India and Europe simultaneously. The energy inflation that followed is now locking in a higher-for-longer U.S. Federal Reserve posture with global consequences.
Futures markets price just a 1-in-3 chance of any Fed cut in 2026.2 Elevated U.S. rates strengthen the dollar and tighten financial conditions for emerging markets carrying dollar-denominated debt.
Cloud ETFs Bear the Brunt
Global investors in cloud software funds are absorbing severe losses. WCLD has fallen 22% year-to-date.1 CLOD is down 14%. SKYY has shed 10%. These funds hold high-multiple software names valued on discounted future cash flows. Higher rates make that math brutal.
Cloud and AI software companies trade at large revenue premiums. With inflation anchoring rates higher, investors are compressing multiples across the sector — a trend visible from New York to London to Singapore.
Broader Cross-Asset Signals
The rate regime is marking other assets. Thirty-year U.S. mortgage rates remain above 6.3%, suppressing housing.1 Treasury yields have compressed to 4.23%.1 Gold is surging alongside that yield move — a flight to safety, not a growth bet.
These moves tell a consistent global story. Markets are not pricing a soft landing or an imminent Fed pivot. They are pricing persistent inflation with no near-term relief.
What Traders Are Watching
For cloud and AI software equities, the key variable remains the inflation trajectory. A sustained move back toward 2% would reopen the Fed's cutting window and allow multiple expansion. Until then, the discount-rate headwind persists globally.
The Iran war adds a geopolitical wildcard. If Hormuz disruptions ease, energy inflation could unwind and shift the rate calculus worldwide. If they persist or escalate, CPI pressure may not have peaked — and global cloud and AI valuations remain exposed.
