The U.S. economy's gross domestic product expanded at a 1.5 percent annual rate in the second quarter, a slowdown from the first quarter's 2.1% and below economists' expectations. This deceleration is attributed, in part, to the conflict in the Middle East, which has disrupted energy prices and supply chains.

Rising oil prices led to a surge in U.S. gasoline prices, impacting consumer spending. Despite this, consumers continued to spend, supported by a healthy labor market and tax benefits. Investment in artificial intelligence also contributed to economic momentum.

Separate data showed inflation slowing in June, with the Personal Consumption Expenditures (PCE) index rising at a 3.7% annual rate. Core PCE, excluding food and energy, increased by 3.3%. These softer inflation figures may influence the Federal Reserve's decision on interest rates, as Chairman Kevin Warsh noted inflation remains above the central bank's 2% target.

Analysts like Chris Zaccarelli from Northlight Asset Management expressed concern about the economy slowing too rapidly, while others see the lower PCE readings as providing the Fed room for patience. Oxford Economics predicts core inflation will remain elevated through the year.