Perspective: Morning Commentary for June 2

By: Arlan Suderman, Chief Commodities Economist

Tue, 02 Jun 2026, 13:12

June 2 – Stock futures pulled back from Monday’s record performance overnight, along with many of the food- and energy-based commodities as well. AI optimism continues to fuel the run in stocks, along with strong earnings reports, while commodities hit headwinds on renewed peace hopes again. The VIX, Wall Street’s fear index, is again trading at a relatively low 16 this morning, while the dollar index trades near 99.1. Yields on 10-year Treasuries are trading near 4.44% after hitting a three-week low this morning, while yields on 2-year Treasuries are trading near 4.02%. WTI crude oil is trading near $91 per barrel, while Brent trades near $94 per barrel. The grain and oilseed markets were mostly lower overnight, along with energy.

President Trump continues to say that he’s close to signing a peace deal with Iran, and investors want to believe him – at least that’s what record stock prices and sub-$100 crude oil prices would suggest. Iran stated on Monday that it was cutting off indirect talks with the United States due to Israel’s incursion into Lebanon to attack Iran-backed Hezbollah. President Trump said that he intervened, and Pakistan indicated that the talks were continuing despite the fact that Israel is still advancing in Lebanon. Both Iran and the United States continue to hold to their “red lines” of demands that keep them far apart on the most critical issues, so the negotiations appear to be focused on how to find some way to reach a level of Strategic Stability that would allow both sides to claim victory. And that’s likely what investors have settled their hopes on – that we’ll reach a level of stability that allows for economic growth. But that necessitates that the Strait of Hormuz opens up for free commerce, which would require Iran to give in on one of its key red lines.

Iran added intrigue Monday when it threatened to also shut down the Bab El Mandeb Strait, through which traffic flows in and out of the Red Sea. The other end of the Red Sea has the Suez Canal, so ships wouldn’t be trapped. But it would dramatically increase costs for trade between Europe and Asia, while also restricting Saudi Arabia’s ability to supply Asia with crude oil via its port on the Red Sea. Shutting down the Bab El Mandeb Strait would likely require cooperation from the Houthi’s who work out of Yemen. The Houthi’s previously terrorized ships passing through the Red Sea before the United States conducted military strikes against them, which has largely kept them quiet to this point since that time. Nonetheless, it’s a threat that caught the attention of the markets on Monday.

I see the greatest threat to resolution currently being the approach of the U.S. midterm elections. We have a free and open society in the United States, where the party in charge is constantly criticized, and that freedom of speech is protected. The downside of that is that Iran sees those headlines as evidence that it can out-last President Trump. Iran knows that the midterm elections are critical to President Trump’s ability to maintain his presence in the Middle East, as well as to sustain much of the rest of his agenda. As such, Iran’s Revolutionary Guard will be emboldened to continue their stall tactics, maximizing pain for the U.S. consumer and much of the rest of the world the closer we get to the midterm elections. I hope that I am proven wrong, but my bias is that we will not see the level of flow through the Strait of Hormuz needed to reverse the current energy and fertilizer deficit for some months to come. I hope that I have to eat those words, but that is my bias now that we’re into the month of June.

China continues to build debt to keep its economy moving in the face of U.S. tariffs and sanctions. It structures its programs to largely depend on local government debt, which the central government eventually then backs. Local government bond issuance has been steadily rising in recent years, going up another 9% to 4.72 trillion yuan in the first five months of this year. Of that total, 30% of the debt issuance was to refinance existing debt. Total special purpose bond issuance for projects was close to 1.5 trillion yuan, with 43% of that targeting municipal and industrial park infrastructure. Some emphasis is now shifting towards projects with stronger economic and industrial linkages rather than basic infrastructure development. There are 31 reporting provinces in China, with 21 of them reporting expenses larger than revenues currently. These provinces historically got their revenue from land sales, but China’s property market remains in a deep recession.

USDA reported Monday afternoon that 67% of the U.S. corn crop rates Good to Excellent as we begin the summer, compared to the five-year average for the week of 71%. The nation’s soybean crop is rated 66% Good to Excellent, up from the five-year average of 65%. On the other hand, 47% of the spring wheat crop is rated Good to Excellent, down 10 points from the five-year average for the week. That’s largely due to dryness, but forecast rains this week are expected to boost those ratings going forward. The bottom line is that crop ratings in June have a low correlation to final yield, but it also indicates that few threats to this year’s crop’s can currently be seen.

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Matt ZellerTue, 04 Aug 2026, 12:43

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