Oil shock fades, but Brazil's inflation anchors remain stubbornly high.

The first meaningful data point this Monday came not from the markets but from the Focus Bulletin: for the first time since the U.S.-Iran war broke out on February 28, the economists surveyed by the Central Bank trimmed their 2026 IPCA projection, from 5.33% to 5.30%. The revision is modest — three hundredths of a percentage point — but the symbolism is considerable. It coincides with oil's return to pre-conflict levels, after the 60-day ceasefire between Washington and Tehran allowed for the gradual reopening of the Strait of Hormuz, which had been blocked for roughly four months. Brent, which had spiked when the strait was closed, ends the week near stable and below US$70 a barrel — a relief that, however, analysts at Itaú Unibanco and other major banks warn will not be enough to guarantee further significant cuts in the Selic, currently at 14.25% per year.

The reason for that skepticism lies in another Focus number: the median projection for 2027 IPCA rose for the seventh consecutive week, to 4.18%, while the 2028 estimate remains at 3.70% — a level that reflects the persistent unanchoring of long-term expectations. As a result, DI futures rates edge moderately lower this morning, tracking the relief in U.S. Treasuries as Wall Street returns from the Independence Day holiday, but without signaling any deeper shift in trajectory. The commercial dollar, which had closed Friday at R$5.168 — down 0.75% on a day of reduced liquidity — opens the week slightly higher, quoted at around R$5.179, in line with global dollar strength.

The economic team has additional reasons to maintain a cautious stance. Finance Executive Secretary Rogério Ceron had voiced concern over the real yield on inflation-linked bonds — the NTN-Bs — which exceeds 8% per year, and signaled that the National Treasury stands ready to intervene to preserve liquidity if necessary. The Ibovespa, in turn, slips at the open, weighed down by banks, Petrobras and Vale, on a session that underscores the diagnosis offered by a Folha de S.Paulo columnist: the Brazilian stock market has shrunk again, and anyone looking to bet on the growth of the country's companies has fewer and fewer alternatives — a bitter irony in a country where 34% of the population is already betting on World Cup results.

The Iran war left marks that the ceasefire will not erase. Fixed-income funds recorded outflows of R$17 billion last month, with some posting negative returns — an unusual outcome for an asset class designed precisely for predictability. Highway and sanitation concessionaires are still digesting the surge in input costs triggered by the oil shock, and the airline sector feels the impact acutely: the average price of domestic tickets reached R$632.53 in May, up 11.2% from the same month in 2025, according to Anac, driven by a 68.5% rise in the price of jet fuel.

On the fiscal front, tensions are rising. The Lula administration has accumulated a package of spending and benefits already topping R$180 billion in 2026 — an election year — with effects that will extend into the next presidential term, according to a Folha de S.Paulo survey. A first-of-its-kind poll shows that Lula's approval rating is the most sensitive to inflation and unemployment among all Brazilian presidents over the last 30 years, which explains part of the political logic behind the spending, but also amplifies the fiscal risk perceived by the market. An independent study identified flaws in the fiscal risk estimates published by the government alongside the LDO, while the TCU is pressing the Treasury to revise procedures for granting a sovereign guarantee on a new loan to Correios.

El Niño adds a climate variable to the economic equation. The Finance Ministry is expected to raise its 2026 inflation projection, currently at 4.5%, while the Central Bank is already citing the phenomenon as an additional source of uncertainty. Climate models point to a high probability of an intense El Niño in the second half, with impacts on agriculture, energy and logistics. In agribusiness, meatpackers report that Brazil's beef quota for China — 1.1 million tons — was exhausted in June, with sales expected to be paralyzed until October. Banco do Brasil is cutting rural credit for the second consecutive harvest, and producers in Rio Grande do Sul are shifting from wheat to canola in the face of climate risks.

By contrast, the government raised its 2026 trade surplus projection to US$90 billion — well above the US$72.1 billion estimated in April — supported by the strength of exports. The new forecast comes as representatives of Brazilian industrial associations appear this week before USTR public hearings in Washington to argue that the tariffs proposed by the Trump administration harm the U.S. production chain itself. The mission runs parallel to the U.S. trip by Senator Flávio Bolsonaro, who on Tuesday will take part in the same USTR hearing seeking to position himself as a privileged interlocutor for the White House — a move that specialists consider to have limited trade impact and significant electoral risk.

On the agenda for the coming weeks, three vectors deserve special attention: the Copom's decision on the next steps for the Selic amid a scenario of slow disinflation and unanchored expectations; the evolution of trade negotiations between Brazil and the United States ahead of the possible imposition of tariffs; and the intensity of El Niño in the second half, which could determine whether food inflation — already up 4% in the first half in São Paulo — returns as a dominant factor in the monetary policy debate on the eve of the October elections.

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**Engie Brasil Energia (B3: EGIE3)** — The company, controlled by France's Engie group, filed for a primary share offering that could reach R$10.5 billion, with pricing scheduled for July 14, in one of the largest capital raises in the Brazilian renewable energy market in years. The board also approved the issuance of R$700 million in debentures.

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