YCC CAPITAL Global Strategy June 21, 2026 Executive Summary Financial markets have largely celebrated the announcement of a temporary U.S.–Iran agreement, a 60-day ceasefire framework, and the gradual reopening of the Strait of Hormuz. Asset prices have responded as if a major geopolitical risk has been removed. Yet the real economy operates on a different timetable. The central message from our analysis is straightforward: markets are pricing peace, while households, corporations, and governments are still paying the bill for war. The economic transmission of the energy shock has not yet fully passed through inflation, wages, consumption, and corporate earnings. The relief is real, but it is neither immediate nor guaranteed. Much like a household whose utility bill arrives weeks after a heatwave has ended, economies often experience the most painful consequences of an energy shock after the headlines disappear. That lag now matters enormously for investors. YCC Perspective The ceasefire represents a meaningful de-escalation rather than a durable geopolitical settlement. Investors should resist the temptation to treat the reopening of Hormuz as an “all clear” signal. The next phase of the cycle is likely to be defined less by military developments and more by three questions: How quickly can global energy flows normalize? How persistent will inflation prove to be? Will central banks tighten policy into weakening economies? Those questions—not the ceasefire announcement itself—will determine asset returns over the next 12–18 months. The Deal: A Framework for De-escalation, Not a Final Settlement The U.S.–Iran understanding establishes a 60-day ceasefire period, opens a pathway toward renewed nuclear negotiations, and creates conditions for the gradual reopening of the Strait of Hormuz. The agreement also provides Iran temporary flexibility to increase oil exports while broader sanctions discussions continue. However, permanent sanctions relief remains conditional upon progress in nuclear negotiations and compliance with broader geopolitical commitments. This distinction is critical. The market has interpreted the agreement as a solution. In reality, it is closer to a probation period. The durability of the arrangement depends on: Successful mine-clearing operations in the Strait of Hormuz. Restoration of commercial shipping confidence. Stability in war-risk insurance pricing. Continued progress in nuclear negotiations. Maintenance of ceasefires across other regional fronts, particularly Lebanon. History suggests that confidence recovers more slowly than physical infrastructure. Even after the Iran-Iraq War ceasefire in 1988, commercial shipping required months—not weeks—to normalize despite naval protection. Energy Markets: Relief Arrives Slowly The market’s first reaction has focused on oil. That reaction is understandable but incomplete. Our base case assumes: Approximately 65% of disrupted oil supply returns within three months. Around 80% returns within four months. Full normalization occurs near year-end. Under this scenario: Period Brent Oil Forecast Q3 2026 ~$80/bbl Q4 2026 ~$75/bbl 2027 Average ~$70/bbl The decline in prices reflects normalization rather than oversupply. Additional barrels are expected from: Iran OPEC production normalization U.S. output Venezuela Other non-OPEC producers At the same time, global demand is expected to recover as Asian industrial activity improves and strategic inventories are replenished. The result is not a collapse in oil prices but rather a transition toward a more balanced market. Inflation: The Peak Is Still Ahead One of the most important market misconceptions today is that lower oil prices immediately mean lower inflation. That is not how inflation transmission works. Energy shocks move through the economy in stages: Energy and transport costs rise. Producer prices increase. Businesses pass costs to consumers. Wage negotiations adjust. Core inflation rises with a lag. As a result, inflation may actually worsen before it improves. Our expectations: United States 2026 CPI: approximately 3.3% Core CPI exceeds 3% during Q4 2026 Eurozone Inflation peaks near 3.4% Average 2026 inflation around 3.1% Real wage growth is unlikely to turn meaningfully positive until early 2027. Markets are therefore discounting inflation improvement several quarters before official data will confirm it. Central Banks Face Their Biggest Policy Risk Since 2022 The Federal Reserve and the ECB now face an uncomfortable dilemma. By the time inflation data peaks, underlying economic momentum may already be weakening. Yet policymakers remain heavily dependent on backward-looking indicators. Our base case expects: One additional Federal Reserve rate hike. One additional ECB rate hike. The risk is clear: Central banks may tighten policy precisely as inflation pressures begin fading and growth slows. This risk is particularly acute in Europe, where growth is already fragile. The United States enjoys stronger structural growth drivers and therefore has greater capacity to absorb further tightening. Europe does not. Why Europe Remains the Most Vulnerable Region The U.S.–Iran agreement does not affect all economies equally. America enters this period with several advantages: Net energy exporter status. Strong AI-driven capital expenditure cycle. Supportive fiscal policy. Wealth effects from elevated equity valuations. Europe enjoys none of these offsets. The Eurozone remains vulnerable because: Energy intensity is higher. Trade dependence is greater. Consumer confidence remains weak. Fiscal flexibility has been largely exhausted. Germany benefits from defense and infrastructure spending. Elsewhere conditions remain far more challenging. France, for example, continues to show deteriorating business sentiment and weak growth momentum. For European households, the squeeze is likely to persist through most of 2026. Energy bills absorb a larger share of disposable income than in the United States, while mortgage repricing remains especially painful in markets such as the United Kingdom and the Netherlands. China: Stable Growth, Persistent Export Strength China remains one of the more resilient major economies. Growth continues to be driven by: High-tech manufacturing. Export competitiveness. AI-related hardware demand. Clean-energy supply chains. Our expectations: Year GDP Growth 2026 4.7% 2027 4.4% Inflation remains subdued: Year CPI 2026 1.0% 2027 1.2% The People’s Bank of China therefore retains flexibility to maintain accommodative policy. The primary risk remains trade policy, particularly potential U.S. tariff escalation. Corporate Impact: Pricing Power Becomes Everything Lower energy prices help businesses, but not equally. The key dividing line is pricing power. Likely Beneficiaries Airlines Branded pharmaceuticals Specialty chemicals Fertilizer producers Semiconductor companies benefiting from AI demand More Vulnerable Industries Automotive OEMs Generic pharmaceuticals Consumer hardware manufacturers Commodity producers without