31.08.2026 - Strikes resume again
After roughly a month of relative military calm, the US and Iran have exchanged strikes again, bringing geopolitical risk in the Middle East back into focus.
American forces struck an island in the Strait of Hormuz, while Iran responded by launching attacks on the United Arab Emirates and Jordan.
At the same time, US Treasury Secretary Scott Bessent said today that the objective of the economic pressure on Iran remains to force Tehran back to the negotiating table. However, he also acknowledged that President Trump believes Iran is still “not ready” to make a deal.
Markets: risk appetite fades
Equities: Most major indices are trading in the red as geopolitical uncertainty returns
Bonds: Yields are moving higher again. The US 10-year yield is back around 4.76%, while the Japanese 10-year yield has risen to around 2.95%.
Commodities: Oil prices are higher, with WTI around USD 85/barrel and Brent around USD 90/barrel.
Precious metals stabilized following Friday's decline, with gold around USD 4,430/oz and silver around USD 66/oz.Currencies: The US dollar is weaker against most major currencies, while the Japanese yen has stabilized around USDJPY 160
Cryptos: slighlty higher - Bitcoin around USD 78k
Volatility: The VIX index remains at low levels moving back above 15 (still good opportunity for hedging)
My View: The resumption of strikes does not come as a surprise to me. The combination of renewed military action and continued economic pressure confirms that the conflict remains far from resolved.
As highlighted repeatedly over recent months, I have remained skeptical that this conflict can be brought to a sustainable end under the current circumstances. The fundamental issues remain unresolved: the Strait of Hormuz, Iran's nuclear ambitions, sanctions and the broader geopolitical balance in the region.
The US increasingly appears to be searching for a way out without having found one. Washington is combining military pressure with economic pressure in the hope of forcing Tehran back to negotiations. But if Iran remains unwilling to accept Washington's terms, the options become increasingly limited.
And the political clock is ticking. The US midterm elections are getting closer. Oil prices remain elevated, inflation remains persistent and US consumers are already paying more for goods and services.
A renewed escalation in the Middle East, particularly one that pushes energy prices significantly higher, would add another layer of pressure on the US consumer and the economy.
That creates an increasingly uncomfortable situation for the Trump administration: maintaining pressure on Iran risks higher oil prices and inflation, while backing away risks appearing politically and strategically weak.
With the midterms approaching, the pressure on Washington to find a solution will only increase.
For markets, the key risk remains unchanged: any meaningful escalation around the Strait of Hormuz could quickly turn today's relatively calm market reaction into a spike in oil prices and a much larger risk-off move.
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