By Elwin de Groot, head of macro strategy at Rabobank
US Treasury yields drifted higher yesterday after the Financial Times reported, citing people close to Fed Chair Kevin Warsh, that he would be prepared to raise rates as early as September if incoming inflation data surprise to the upside and markets themselves begin pricing a more hawkish path. Yet the market reaction was not confined to the front end suggesting investors were not interpreting the story in a straightforwardly hawkish manner.
That ambiguity is understandable. If markets push yields higher on expectations of tighter policy, the Fed may feel less need to deliver that tightening. Note also that Warsh himself was not speaking, and one of his recurring themes has been a dislike of explicit forward guidance. Moreover, September remains some distance away in market time, particularly in an environment where geopolitical developments can overturn macro narratives overnight.
Indeed, whilst oil prices had come down in the early part of this week on the back of renewed signs that the Strait of Hormuz could gradually reopen, those same prices rose again overnight as a convincing agreement remains elusive as it offers no permanent solutions for the key sticking points. Instead, it offers another 60-day window of free transits through Hormuz while further negotiations resume. Reports suggest Iran is looking to restrict US and Israeli ships from the Strait and it’s been ear-deafening silent on the ‘nuclear’ issue, for example. If a deal is agreed, it could be a matter of time until either party expresses frustration with the negotiations again and markets are forced to price in another few weeks of geopolitical tension.
Meanwhile, refined products are feeling the pinch of impending shortages, leading us to revise up sharply our forecasts for diesel, gasoil and marine fuels, as our senior energy analyst Joe DeLaura writes. In Europe, it is the winter-demand pressure that hangs over the market. The underpriced risk is that Europe’s own weather stress raises gas burn through the power sector just as LNG supply risks remain elevated, our senior energy analyst Florence Schmitt writes.
European macro data offered little inspiration yesterday. German factory orders surprised to the upside in June, though largely thanks to volatile big-ticket orders. This morning saw industrial production tick 0.2% m/m higher that month, but this was offset by lower growth in the previous month. Elsewhere, the picture was even less encouraging. Industrial production fell in both Spain and Italy, raising the possibility that the eurozone's preliminary 0.4% q/q GDP growth estimate may yet be revised lower. Eurozone retail sales also disappointed, falling 0.3% m/m in June and largely offsetting May's upwardly revised increase. The broader message is that growth concerns are unlikely to disappear simply because oil prices have eased from their recent highs.
In fact, what increasingly defines the global economy is not any single shock, but the relentless arrival of new ones. Businesses and households are being bombarded (in some regions rather literally) by an overlapping set of disruptions: trade disputes, geopolitical conflict, policy uncertainty, financial market volatility, technological disruption and natural disasters. The first eight months of 2026 have already provided a year's worth of such events.
The obvious example is the Middle East conflict and the disruption of shipping through Hormuz. But it is far from the only one. Investors continue to grapple with uncertainty surrounding the US tariff regime, while questions persist over the sustainability of the AI investment boom and the valuations attached to it. A rising string of hacking reports and AI models behaving unexpectedly has raised concerns over AI’s controllability.
In Europe, concerns are mounting over intensifying Chinese competition and the growing economic costs of climate change. Scorching temperatures, drying rivers and devastating wildfires have already become defining features of this summer. Looking ahead, forecasters are increasingly focused on the emergence of a potential "super El Niño" event, which could amplify weather-related disruptions across a wide range of emerging and developed economies.
Yet uncertainty is more than merely a transmission channel for shocks. It is an economic force in its own right.
Franklin D. Roosevelt famously captured this during the depths of the Great Depression when he declared in his first inaugural address that "the only thing we have to fear is fear itself". Nearly a century later, the insight remains remarkably relevant. Uncertainty can paralyze decision-making, delay investment, encourage precautionary saving and ultimately amplify the effects of whatever shock triggered it in the first place.
An interesting ECB study published in its latest Economic Bulletin broadly confirms the point. Looking at the eurozone, the analysis finds that uncertainty shocks tend to reduce investment, particularly spending on tangible capital, as well as consumer purchases of durable goods. The effects are most visible during the first two to four quarters following the shock. Importantly, however, the impact appears largely transitory. After an initial decline, activity tends to recover and the long-run effect on output is limited.
Part of that result may reflect modelling choices. But there is also an intuitive economic explanation: people learn. Households, businesses and investors gradually adapt to recurring shocks. The unfamiliar becomes familiar. What initially causes panic eventually becomes incorporated into decision-making. That observation brings us back to a theme from our Monthly Outlook, Groundhog Day Economics: markets seem to become more accustomed to geopolitical disruptions, yet every recurring script carries the risk of a very different ending.
Interestingly, the same logic may apply in reverse. As our colleague Stefan Koopman argues here, UK Prime Minister Andy Burnham may seek to replace "securonomics" with a form of "vibonomics": generating a series of positive confidence shocks before embarking on more politically difficult structural reforms. The idea is simple enough. If uncertainty depresses activity, improved confidence can temporarily support it.
The key word, however, is temporarily. The lesson from both the ECB's research and recent market experience is that confidence effects can move demand forward in time, but they do not permanently raise an economy's growth potential. Lower precautionary savings may provide a one-off boost to spending. Positive sentiment may temporarily lift GDP. But neither changes the underlying supply capacity of an economy.
Ultimately, uncertainty may rule the headlines, and confidence may shape the near-term cycle. But lasting prosperity still depends on a far less fashionable ingredient: stronger supply-side growth.
Tyler Durden Fri, 08/07/2026 - 14:40* * *
Bessent: Today or Tomorrow the Strait will be Open; Iran Signals 'Compensation'Iran has announced that under the 'finalized' Oman-Iran scheme and 'deal' for management of the Hormuz Strait that "enemy countries" (read: US and Israel) may only transit the waterway after lifting sanctions and paying compensation for the war.
While this was not issued by the Foreign Ministry or top leadership per se, it does appear to represent Tehran's overall position, after on Thursday it first declared that US and Israeli-linked ships will not be allowed Hormuz transit under the Oman plan:
Tehran Mayor says Passing through the Strait of Hormuz is subject to the lifting of sanctions and the payment of compensation:
"The countries that have attacked Iran will not have the right to use this strait until compensation is paid. Governments that freeze Iranian assets or continue to impose sanctions and threaten the nation will be deprived of this strategic boon."
While Treasury Secretary Scott Bessent has appeared to back the Omani plan to reopen the strait, the US State Department has also newly warned on Friday that more 'decisive action' will be taken to cut off sources of Iran's funding. Bessent has newly stated that...
I think shortly, maybe even today, tomorrow, we are going to see an agreement, a 30- to 60-day ceasefire, and the Strait will be open.
This is somewhat surprising, but as we described below, it seems a final Washington exit is indeed in motion, even if it leaves Iran with greater leverage in the region. Like Trump's latest comments Thursday night, Bessent seems in 'mission accomplished' mode with this newly published interview...
Bessent on Iran:
We have them by the throat, and they've got 150–180% food inflation, not able to pay the troops.
I think shortly, maybe even today, tomorrow, we are going to see an agreement, a 30- to 60-day ceasefire, and the Strait will be open.
Energy prices should come… pic.twitter.com/C1vGuQUIRM
This really does sound like 'it's finally over' talk...
Bessent on the Strait of Hormuz:
The strait is never going back to the way it was because the Iranians have used, or tried to use it, as a choke point.
What we are going to see over the next two years, the strait is going to become irrelevant.
It is going to become just… pic.twitter.com/LP8evMbeJP
President Trump's latest Iran comments came Thursday night, after a prior day wherein Iran and Oman unveiled their 'finalized' Hormuz management scheme, which most notably includes a ban on all US and Israeli vessels in the energy transit waterway.
As we reviewed earlier, the White House has appeared to genuinely be searching for an exit strategy, but this stipulation alone may be too hard a pill for Trump to swallow, if accurate - given that it obviously leaves Iran in de facto control of the strait. Many pundits have pointed out it even leaves Iran with more leverage and power in the region than before the launch of Operation Epic Fury.
But this is why Trump's comments to reporters in the Oval Office Thursday evening are surprising, given that instead of reacting angrily and outright condemning the Iran-Oman plan, his reaction was somewhat muted and meager. Doves who see this war as disastrous and hope for quick exit will welcome the development.
via Reuters Trump: Going to End Pretty Soon"I think it's going to end pretty soon. I don’t think they can go much longer," the president said, while leaving his meaning ambiguous. Asserting once again that the US is involved in negotiations with Tehran (something the Iranians have been vehemently denying all along), Trump added that "I think we’re doing fine."
The only thing Trump truly got angry about Thursday was related to the domestic side of the conflict, after US major media published several reports saying the Pentagon is perilously low on missiles and interceptors, which have been drained after nearly six months of war. He blasted 'treasonous' 'fake reporting' and even threatened to jail 'leakers' over the reports (the inherent contradiction says a lot here).
But again, Trump's penchant for raging against 'dishonest' and 'evil' Iranian leaders has been curiously absent over the last several days as the US bombs have fallen silent - after he called off planned 'harder' strikes over the weekend (or the last big TACO moment, among many prior).
This relative quiet at the White House comes even after Iran's parliament speaker Mohammad Bagher Ghalibaf openly mocked the United States and Trump's theatrics and constant changes of course on X. He wrote Thursday:
"Massive attack coming… wait, never mind, they want to negotiate." That’s theater diplomacy on loop. Using bullying + broken promises + fake news as leverage is a failed strategy. Acknowledge the facts and fulfill your commitments. We don’t need more theater.
All of this change in Washington tone and posture suggests this could finally be the moment for a true offramp, as the US faces a 'go big or get out' realization, and as the prospect of slogging through months more of a developing quagmire becomes too politically and economically costly. This is potentially the declare 'victory' and get out moment. As former Congressman Ron Paul has put it: Just Walk Away!
Trump: I think the war with Iran will end pretty soon. I don’t think they can go much longer.
Q: Have you reached a deal to reopen the strait of Hormuz?
Trump: It’s sort of open right now. pic.twitter.com/J3lcPyuVwM
This is further evidenced in Trump's sudden realism, expressed late Thursday in the same Oval Office presser. When asked about the status of the Strait of Hormuz, he admitted that "it's easy for them to send a drone or two, drop a mine, or deliver a close range missile somewhere along, or in, this Waterway, no matter how badly defeated they are."
He further acknowledged:
"People don’t want" to risk ships worth billions of dollars and expose them to the possibility of accidentally hitting a mine in the Strait of Hormuz, he conceded. Trump also claimed Thursday that Hormuz is "sort of open right now," although fewer than 10 ships per day transited from Sunday through Tuesday, according to Kpler data.
Of course, the US and Iran have been involved in several of these 'pauses' and cooling off periods before, which were later revealed to be the 'calm before the storm'. Tehran has since wised up and pointed out that the Pentagon used these interim periods of no fighting to just rearm, reposition, and ramp up military supply flights to the region.
Joe Kent: 'Good First Step' Toward an ExitJoe Kent, a top national security official who resigned in protest of the Iran war upon the very start of the operation, is welcoming these signs that Trump is finally seeking to extricate the US from the conflict at all costs:
Trump is messaging that he won the war— this is a good first step in extricating us from what would otherwise be a catastrophic mistake. The reality is, the best “deal” we can make with Iran at this point that works in our favor is to just leave—it’s the only case in which POTUS then holds the cards.
He needs to “close the deal” now, before the Iranians force him back into a shooting war. We simply can’t assume that Iran will wait idly for us to make the next move. Alarmingly, it seems we are failing to account for just how aggressively killing the Ayatollah & bombing the girls’ school has radicalized Iranian leadership & its people—it’s very likely that Iran will feel compelled to drag us back into the war in order to force the U.S. to retreat, bloodied, both for the sake of its national honor & for deterrence.
Trump can end this by pulling our troops & ships out of the region now—deprive Iran of targets to hit and the leverage they need to escalate. Trump says we’ve won, therefore we can bring them home.
So either Trump is indeed preparing to go bigger, or this is - belatedly - the final 'cut and run' moment that probably the majority of the American public has been hoping for.
Another sign, via his Truth Social latest, that Trump could finally be willing to say 'mission accomplished' and get out, while letting the regional and oil transit 'chips fall':
Iran Hasn't BlinkedThe deadly alternative to simply declaring an exit is an eventual introduction of ground troops and full-on regime change. Thankfully, Trump officials have continued to by and large condemn this as a legitimate scenario - given it would surely once again put US forces in a new 'forever war' that would last years or even decades.
Read our: Visualizing Iran's Vast Size & Why Any Ground Invasion Means Years-Long Quagmire
But in the meantime, the Iranians do smell weakness and blood in the water. Just before US markets closed Thursday, Tehran announced its forces attacked and struck 'hostile targets' at Qeshm island, near the entrance to the Strait of Hormuz.
Iran is remaining defiant, and even sees itself in the driver's seat with its ability to wage asymmetric warfare against a much larger US foe which is confused on what to do next. This was also on display with Iranian President Masoud Pezeshkian having asserted this week in an interview, "Our enemies expected the country to collapse due to the pressures they have exerted." He added that these pressures have "reached their maximum".
Tyler Durden Fri, 08/07/2026 - 14:30Authored by Dave DeCamp via AntiWar.com,
President Trump on Thursday threatened "leakers" with jail time over reports about dwindling US military stockpiles as a result of the Iran war, and claimed the US had plenty of munitions available.
"The US has massive amounts of ‘munitions,’ especially of certain types. Additionally, large amounts are being manufactured and shipped to the US as needed," Trump wrote on Truth Social.
Official White House Photo"Defense companies are building the largest number of plants and factories in our country’s history. The 'leakers' of these treasonous statements are being hunted down," the president added.
Some of the most significant reports about the shortage of advanced munitions didn’t come from media reports but from analysis published by the think tank the Center for International Studies (CSIS), which used publicly available data to produce its estimates.
CSIS found that the US has used about 60% of its advanced Patriot air defense missiles and about half of its interceptors for the THAAD missile defense system, though sources told CNN that the US had actually used about 80% of its THAADs during the war.
While Trump says that US arms makers are working to produce more munitions, the current rate of weapons use far exceeds the rate at which they can be produced, and it will take years to significantly increase production.
Media reports have also said that the US has used up nearly all of its ATACMS missiles and Precision-Strike Missiles, which were both used extensively in strikes on Iran.
Trump also responded to a report from The Washington Post that said he lashed out at US Secretary of War Pete Hegseth over the munitions shortages, which one source told the outlet was part of the reason why Trump held off on his threats to dramatically escalate the war.
Sources told the Post that on the sidelines of a recent cabinet meeting at Camp David, Trump vented his frustration at Hegseth over the munitions shortages. The report said that Hegseth then blamed his deputy, Stephen Feinberg, for both the shortages and for failing to ensure Trump was informed about the issue.
Asked about dwindling US weapons stockpiles, President Trump on Thursday said there's a "virtual unlimited supply" of certain munitions and "we have others where it’s a little bit tighter" https://t.co/UFMSGvXiWa pic.twitter.com/lZtfbSuKgB
— Bloomberg (@business) August 6, 2026"The Fake News, as usual, is spreading false and completely unfounded rumors. I am extremely happy with the job that Pete Hegseth is doing," Trump wrote on Truth Social. He said that the Post published the report "despite our telling them their story is completely FALSE" and added that he believed their "fake ‘reporting’ is treasonous."
Tyler Durden Fri, 08/07/2026 - 14:00