Iran announced it targeted three oil tankers using an unauthorized route through the Strait of Hormuz and several US-linked ships, along with a US naval drone and an American military unmanned surface vessel. This action was described as retaliation for American attacks on Iranian tankers over the weekend. The Islamic Revolutionary Guard Corps Navy did not specify if the vessels were hit. This follows earlier US Central Command (CENTCOM) strikes on three Iranian vessels, including a tanker off Kharg Island and another near Jask, claiming these were part of a shadow network financing the IRGC. These events mark an escalation in a months-long conflict where both sides are exerting control over the strategic Strait of Hormuz, a critical global chokepoint.
Simultaneously, Russia and Ukraine exchanged another wave of overnight strikes. This occurred as US envoys Jared Kushner and Steve Witkoff were en route to Kyiv from Moscow, following discussions with President Vladimir Putin. These ongoing hostilities contribute to a complex geopolitical landscape alongside the escalating US-Iran maritime conflict.
Domestically, the Trump administration is intensifying pressure on the Federal Reserve to prevent an interest rate hike ahead of the Sept. 15-16 meeting. President Trump, Vice President, Treasury Secretary, and a senior economic counselor have urged the Fed not to raise rates, with Trump even threatening tariffs if rates are not cut. This pressure comes as markets are pricing in about a 60% probability of a rate hike, bolstered by a strong jobs report. Several Fed officials, however, are concerned about inflation running substantially above the Fed's 2% target for five years, with 54% of components in the PCE price measure having risen more than 3% over the past year. This comes at a crucial time two months before the November midterm elections, where voter dissatisfaction with higher prices and interest rates is prevalent.
The global economic outlook is further complicated by rising bond yields, with the US 10-year Treasury yield reaching a 20-month high of 4.78%. Analysts warn that a rise past 5% would be a "concern zone," indicating alarming increases in borrowing costs for governments, companies, and households. This rise is primarily driven by higher real yields, not inflation expectations, posing a significant risk to various assets, including stocks and mortgage rates. Experts caution that higher yields will make it more expensive for companies, particularly those in AI, to raise capital and will increase debt-related costs for governments, potentially hindering public investment. Brent crude futures closed at $96.28 a barrel on Friday, their highest level since July 24, up from roughly $70 before the war, with diesel hitting a new record price of $5.85 a gallon in the US, exacerbating concerns over global energy supplies and contributing to public dissatisfaction with the ongoing conflict.
Amidst these developments, a Reuters/Ipsos survey found that only 31% of Americans support the war, while 63% are against it, indicating widespread public opposition and contributing to President Trump's declining popularity. The director of the Middle East studies program at George Washington University, Sina Azodi, and analyst Ali Akbar Dareini, from the Center for Strategic Studies in Tehran, both commented on the escalating tit-for-tat attacks, emphasizing that Iran cannot leave the US attacks on its oil tankers unanswered.
