Welcome to another week! Nine nights of bombing, tankers ablaze, and Brent above $90. The war for the Strait is escalating fast. Some reports suggest a ground invasion could be coming. I won’t jump to such conclusions too soon, but tensions are definitely high.
Additionally, thanks to a new Substack feature, I have a small segment just for my paid subscribers in today’s article.
We had plenty of developments outside of the Iran war, so let’s look at prediction markets to make sense of the world!
Weekly Outlook
US Inc.
Trump used a primetime White House address to accuse China of helping to rig America’s elections, blaming the deep state for covering up “China’s sinister election meddling” and releasing documents that supposedly prove his case. The Chinese embassy rejected the claims. ABC, CNN and NBC refused to air the speech live and now Trump wants their licenses revoked for it.
Comment: I think that the election interference narrative works well to motivate right-leaning voters. We should see more of that as midterms come closer. The market broadly agrees as chances of any license being revoked are at only 19%.
New York became the first state to freeze construction of large data centers. Anything drawing 50 megawatts or more is on hold for up to a year while officials work out a “regulatory framework”. Anti-data-center sentiment is spreading across America on environmental grounds, utility costs and general distrust of the technology.
Comment: the market spiked on the news, but it needs a proper bill rather than an executive order. Traders now see a 79% chance of a moratorium in any state by the end of the year, fueled by the first step New York made.
Some good news on inflation: the headline rate fell to 3.5% in June, from 4.2% in May, which is a steeper drop than expected, driven by cheaper gas. Core inflation eased to 2.6%. That takes some pressure off the Fed, though Kevin Warsh refused to declare “mission accomplished” and reiterated his commitment to the 2% target.
Comment: traders were a bit surprised by the newest inflation print, but they still expect annual inflation to be above 3.75%. Additionally, a hike is still largely expected:
United Airlines expects almost $6 billion in extra fuel costs this year thanks to geopolitical uncertainty. Fuel spending jumped 84% year on year in Q2. The airline still beat expectations with $17.7 billion in revenue, up 16%.
Comment: but the mainstream media will continue to convince you that all is good and there is no oil shortage. It’s going to get worse before it gets better.
Meta may rent computing power to Anthropic in a deal reportedly worth up to $10 billion over two years, according to the New York Times. Talks are at an early stage, but Zuckerberg has long hinted that Meta’s excess compute is for sale at some premium.
Comment: after the new Kimi model everyone understands that compute is not the bottleneck it used to be.
The Americas
Trump threatened Canada with additional tariffs over the smoke from hundreds of wildfires currently blowing into the US, accusing Ottawa of not properly maintaining its forests. Ontario’s premier Doug Ford called the threat unacceptable and suggested Republicans send help instead.
Comment: for Trump the wildfires are just another occasion to poke Canada. Same as Alberta independence or calling Trudeau the governor of the 51st state.
A 5.5-magnitude earthquake hit Peru’s Andes region, killing at least six people and displacing hundreds. Several buildings collapsed, including a 16th-century church.
Comment: additionally, we had massive storms in Chile, courtesy of El Nino.
Asia
China’s economy is sending mixed signals. Exports jumped 27% year on year in June to a record $412.4 billion. It’s the biggest increase since 2021, powered by AI hardware. Yet GDP grew just 4.3% in Q2, the slowest pace since 2022 and below Beijing’s target. Domestic demand and investment remain weak.
Comment: China also feels the effects of the Iran war.
Apple finally got Chinese regulators’ blessing to launch its AI services on iPhones in the world’s largest smartphone market. Apple Intelligence will run on models from Alibaba and Baidu.
Comment: China just secured a great opportunity for its models to improve through usage. American frontier labs do not really enjoy any significant lead over Chinese labs.
Australia announced it is working on sweeping AI regulations. The legislation, coming to parliament next year, promises copyright protection for artists and will force big data-center operators to underwrite new power supply. A new Office of Artificial Intelligence will oversee it all.
Comment: AI labs are actually welcoming the regulation as it solidifies their place at the top.
South Korea is opening up its currency. From 2027, foreigners will be able to open won accounts at foreign institutions, ending the requirement to route transactions through Korea — a bold step for a country that has long kept a tight grip on its FX markets.
Comment: do we really need more degens trading KOSPI?
Middle East & Africa
The war for the Strait entered its most violent phase yet.
Trump opened the week by declaring America the GUARDIAN of the Strait of Hormuz, reinstating the naval blockade of Iranian ports and proposing a 20% fee on all cargo passing through.
A day later he backtracked on the fee, saying Gulf states would make trade and investment deals with the US instead. The blockade stayed.
The bombing did too. America has now hit Iran for nine consecutive nights, targeting surveillance sites, air defenses, logistics and weapons storage, and threatened to go after power plants and bridges unless Iran gets to the table and negotiates.
Iran answered with missile and drone strikes on American bases in Bahrain, Kuwait and Jordan, and hit a Kuwaiti power and desalination plant. Two American servicemen were killed in Jordan on Friday and one is missing; a third was killed in Iraq over the weekend, taking the US death toll in the war to 17.
Shipping is caught in the middle of it all. The UAE said Iranian missiles struck two of its supertankers, killing a sailor; Iran later claimed two ships using an unsafe route had an accident and that the strait remains under its complete control. Traffic has collapsed and Brent passed $90.
Comment: I have a small update for my paid subscribers. Otherwise, I wrote an article on the recent Iran war developments, and recorded a video with my thoughts on the markets:
Escalation Trap? What Trap?
Escalation trap! Some analysts are ecstatic that they predicted a return to hostilities. Now, they go a step further predicting further escalation in the Strait of Hormuz, including a US invasion of Iran (sic!). I wonder what they’ll say once it’s clear there’s no US invasion coming.
Houthi rebels fired missiles and drones at Saudi Arabia’s Abha airport after Saudi strikes on Sana’a’s airport, which were meant to stop a plane carrying a Houthi delegation home from Ali Khamenei’s funeral in Tehran. It is the first major Houthi–Saudi escalation since 2022.
Comment: I don’t think either side wants to fire up Yemen along with Lebanon. That said, if we have any surprises in Lebanon, closing the strait is very much in play.
Chevron signed preliminary deals for stakes in Iraq’s oil fields and joined a consortium studying a pipeline through Syria that would bypass the Strait of Hormuz entirely. Trump also teased “massive” oil deals with Iraq.
Comment: this is all great news, but it won’t be up and running anytime soon. It doesn’t change anything for the ongoing Iran war.
Europe
It was a busy week for Ukraine, at the front and at home. At the coalition of the willing summit in Paris, Ukraine and nine European countries agreed to build a shared ballistic-missile defense for Europe, drawing on Ukraine’s experience.
Back in Kyiv, Zelensky reshuffled his government. Parliament confirmed Sergiy Koretsky, boss of state energy giant Naftogaz, as prime minister, with a mandate to focus on relations with America and the EU and on securing weapons.
The reshuffle came at a price. Protests broke out across the country after Zelensky sacked Mykhailo Fedorov, the popular defense minister behind Ukraine’s drone-warfare buildup. Zelensky said Fedorov kept clashing with the generals and that he had to choose between sides; Fedorov says his initiatives were blocked.
On the battlefield, Ukraine keeps squeezing Russia at sea, claiming 116 strikes on Russian ships in the Sea of Azov in nine days, including 11 last week. The waterway carries a quarter of Russia’s wheat exports; Lavrov called the campaign “terrorism, pure and simple”.
Russia hit back at the capital with one of its heaviest attacks in months — 41 missiles and 125 drones overnight on Sunday, killing at least one person and starting fires in five districts of Kyiv.
Comment: interesting, as Ukraine started to gain the initiative, Zelensky replaced the mastermind behind the new plan. Maybe the campaign is too effective and endangers the global oil supply. The Iran war surely takes precedence..
Andy Burnham was confirmed as Labour leader with the backing of 379 of the party’s 403 MPs and takes over from Keir Starmer on Monday. In his speech he said Britain took a wrong turn in the 1980s, when political power was centralized and economic power was privatized, promising devolution and public control over the cost of the essentials. No ministerial team yet.
He inherits a fragile economy. GDP grew 0.1% in May after an Iran-war-driven 0.1% contraction in April, with services doing all the work while production and construction fell.
He also inherits a tense country. Counter-terrorism police took over the investigation into the death of Ann Widdecombe, the Reform UK politician found dead in her home, after new information and evidence emerged. A 28-year-old man arrested earlier in the case has been rearrested on terrorism charges.
Lastly, Britain nationalized British Steel on national-security grounds, and China is not happy. Jingye, the Chinese owner since 2020, is demanding compensation, while Beijing warned the takeover will directly affect Chinese investors’ confidence in the country.
Comment: I’ve already commented a bit on the shape of the new Cabinet in my video. However, the nationalization of British Steel is an interesting decision. Europeans are clearly getting up to speed with what’s happening in the world and they are starting to take care of core industries.
Germany is raiding its climate fund. More than €30 billion ($34 billion) earmarked for heat pump and EV subsidies will be shifted to the federal budget or cancelled outright through 2030 as Merz tries to consolidate public finances.
Comment: Germany has big military ambitions nowadays. They need to finance them somehow.
Volkswagen may cut another 50,000 jobs, per an internal memo seen by Reuters, doubling planned cuts to 100,000 by 2030, 16% of the workforce. Years of falling sales, especially in China, are forcing Europe’s largest carmaker to shrink.
Comment: the fall of the German economy continues.
Other
Spain won the World Cup, beating Argentina 1-0. It took until the second half of extra time to break down the reigning champions, who finished the match with ten men. Trump handed over the trophy alongside FIFA’s controversial boss Gianni Infantino.
Comment: it was a great World Cup, despite low expectations.
Twelve states sued to block Paramount’s $111 billion takeover of Warner Bros Discovery, arguing it hands Paramount too much control over film distribution. The DOJ already approved the deal; the lawsuit could push it past its September 30th deadline, triggering a ticking fee owed to shareholders each quarter.
Comment: I wonder if Netflix had anything to do with it…
Wrap up
That’s all for today! This week comes my deep dive on the Clarity Act. Other than that, I’ll continue to monitor the Iran situation as we might be on the verge of a new chapter in this conflict.
Stay strong and see you soon!
This is not official investment or life advice. Do your own research. These are only my opinions and I encourage anyone to do their own research before putting any money anywhere.