For a second consecutive day, the US military executed offensive airstrikes on mainland Iran, targeting coastal air defences and missile sites. At the NATO summit in Ankara, President Trump declared the truce “over”, warning that future waves of bombing might target Iran’s primary export lifeline on Kharg Island.
The IRGC responded with a second day of drone and missile salvos targeting US naval bases in Bahrain and airbases in Kuwait, prompting active air defence intercepts. Brent crude futures climbed toward $79 a barrel, marking a 10% surge for the week, while non-yielding spot gold fell for a fourth straight day to $4,060 an ounce.
While the Persian Gulf war was restarting, President Trump told reporters he was “feeling the love” from his fellow NATO leaders. However, he did not reciprocate the love equally. Syria’s Ahmed Al-Sharaa walked away with sudden sanctions relief, Ukraine’s Volodymyr Zelenskyy secured a fresh batch of air-defence missiles, and Turkey’s Recep Tayyip Erdogan received a thumbs-up to purchase coveted F-35 fighter jets. Meanwhile, tiny Albania saw its hopes of hosting the 2027 summit abruptly shelved after failing to meet the alliance’s spending targets. As Trump summarised his geopolitical doctrine: “Sometimes you get along with the toughest people, and sometimes you don’t get along with the weakest.”
Back in Washington, the release of the June FOMC meeting minutes provided a reminder that the Fed is quietly shifting from an easing posture to an active tightening bias. But the central bank’s main source of anxiety isn’t just the Middle East energy shock. Policymakers also noted that the insatiable corporate demand for data centres, grid equipment, and computing power is heavily straining the real economy’s capacity to supply goods, turning AI capex into a sticky, broad-based inflationary vector.
Faced with overlapping waves of energy costs and AI infrastructure spending, the policy-sensitive US 2-year Treasury yield drifted toward its yearly high, and overnight Japan’s 10-year government bond yield hit 2.88%, lingering near its highest level since September 1996.
Ironically, just as bond investors brought forward their rate-hike bets, the overcapacity panic that tanked tech stocks earlier in the week vanished.
A key factor enabling equity markets to shrug off fears was reports that SK Hynix’s $29 billion US stock listing was a 7x oversubscribed.
Sentiment was further boosted by reports that Beijing blinked in its technology standoff, planning to allow top-tier mainland AI firms to buy a limited allocation of Nvidia’s advanced H200 chips. The Nikkei 225 jumped 2% to cross above 68,000, and the Kospi rose 3.8%.
Nearby, in China’s $20 trillion economy, things continue to operate at two speeds. Upstream factory-gate prices rose 4.1% year-on-year in June, a four-year high, as the energy shock and demand for tech manufacturing inflated material costs. Downstream, however, the domestic consumer remains frozen. CPI inflation slowed to 1.0%, core CPI touched its lowest level since January, and Chinese auto sales fell for the ninth consecutive month, prompting regulators to launch a crackdown on “involution-style” cutthroat price wars.
In Tokyo, the draft economic blueprint put forward by Japan’s Prime Minister, Sanae Takaichi, plans to invest an unprecedented 370 trillion yen ($2.3 trillion) through 2040 to double annual growth to 1.0% and vanquish household inflationary pain. The main logistical complication is that Japan doesn’t actually have the humans required to realise its dream. The Ministry of Labour expects ageing to shrink Japan’s workforce by 7% by 2040, leaving the country with a deficit of 10 million to 16 million workers. Output per worker would need to expand by 1.5% annually to compensate, a wildly optimistic figure given the historical average of less than 0.2%.
However, rather than proposing to fill the gap with migrant workers, the LDP government has moved in the opposite direction. It has recently stopped accepting foreign workers for food service jobs, doubled the citizenship residency requirement to 10 years, and hiked permanent residency application fees by a 2,900%. As a result, Japan Inc. appears to be heading into a demographic ghost town with huge strains expected in transport and logistics, and care work.
Finally, in the UK, the traditional British Summer is in full swing. The UK’s political clown show has reached full-bore absurdity, with its next-but-one most likely Prime Minister having to spend the next few weeks campaigning in a forgotten English seaside town against the leader of the Recyclons from the planet Sigma IX, who claims to be 5,900 years old.
Count Binface, the only candidate so far to declare against the Reform leader’s by-election stunt, has within his grasp a moment that all Brits of a certain age will celebrate. It is, of course, to bring to life Monty Python’s Election Night Special sketch. Fittingly, in Clacton, there will be no Sensible Party candidates; it will be a straight fight between the Silly Party candidate and a Very Silly independent. As the world order collapses, this is truly a moment to make all of us Brits proud.
My friend, the market meme satirist, Le Shrub, says it’s only when you accept that it’s all nonsense that it starts to make sense.
Good luck out there today.
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