The ceasefire between the U.S. and Iran didn’t last: the two sides exchanged strikes again overnight Monday, cutting transit through the strait to just five vessels a day. Actual volumes could be higher due to disabled identification systems, but Brent crude still climbed back above $91 a barrel, while gold prices fell, although mildly.
The Russia-Ukraine conflict isn’t getting any better either, with Russia’s Defense Ministry saying it is preparing large-scale strikes on Ukraine’s energy infrastructure in response to Kyiv’s attacks. Meanwhile, the two sides are also attacking each other in the Black Sea, disrupting grain supplies to global markets.
And to top it all off, trade wars are back in focus, with China warning against the additional 7.5% U.S. tariff on Chinese goods, calling it protectionism and the politicization of trade, and threatening to retaliate.
Meanwhile, the Canadian government said last week it will impose tariffs of 15%, 25% and 50% on about $20 billion worth of U.S. goods starting September 8, 2026, in response to U.S. plans to raise tariffs on Canadian cars, auto parts, and steel to 50% from January 1, 2027.
For the economy, the main risk from all of this is another inflation spike.
By the way, the U.S. will suffer too, with the Fed’s preferred PCE inflation gauge rising 0.2% in July from the previous month and 3.7% year over year, versus expectations of 0.1% and 3.6%.
Central banks could respond by tightening policy, pushing government bond yields higher across the U.S., Europe, and Japan, potentially weighing on riskier assets.
The hope is that, as the U.S. midterm elections approach, the White House will make some concessions to at least bring fuel prices down and regain voters’ support.
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