Market Report.
🔥 Today’s hot topics are Kevin Warsh’s ratification for the Fed and Trump’s trip to China. But let’s start with our usual part of the war.
⚔️ The conflict between the US and Iran still shows no clear ending.
📰 Yesterday, Iran’s semi-official Tasnim news agency quoted an official as saying: ‘We have deployed deep-sea submarines in the Strait of Hormuz.’
📺 Meanwhile, former US President Donald Trump told Fox News: ‘I am considering reviving Project Freedom.’ Trump also stated: ‘I am going to meet with a large group of generals regarding Iran.’
🗞️ The New York Times reports that classified U.S. intelligence from early May 2026 shows Iran has regained access to most of its missile sites, launchers, and underground facilities. This directly contradicts the Trump administration’s public narrative of a shattered Iranian military.
📍 Iran has restored operational access to 30 out of the 33 missile sites it maintains along the Strait of Hormuz. These sites can threaten American warships and oil tankers, and only three remain totally inaccessible.
🧭 Military intelligence agencies report that roughly 90 percent of Iran’s underground missile storage and launch facilities nationwide are now assessed as partially or fully operational. Iran still fields about 70 percent of its prewar mobile launchers and retains roughly 70 percent of its missile stockpile, including ballistic missiles and shorter-range cruise missiles. This indicates far less destruction than official Pentagon claims suggested.
💣 Faced with limited stocks of bunker-busting bombs, U.S. commanders opted to seal off hardened facility entrances rather than destroy entire sites. Officials admitted the need to preserve munitions for potential conflicts with North Korea and China, which led to mixed results.
🚢 Russia is supplying Iran with drones, parts, and essential goods via the Caspian Sea. Cargo tonnage across the Caspian may double this year, with four Iranian ports working around the clock to bring in food and supplies, mitigating the economic pressure campaign.
😡 After the intelligence findings became public, Trump raged against those disseminating the information, calling them treasonous. Meanwhile, he claimed Iran could be knocked out in a day, despite two months of strikes failing to achieve that result.
🛒 Iran’s population and government are accustomed to hardship, viewing price fluctuations as inconveniences that do not break national will. The United States, however, is far more politically fragile, where even a single percentage point of inflation can swing elections.
⛔ The blockade of the Strait of Hormuz is withholding critical industrial inputs including naphtha, sulfur, urea, lubricants, and countless plastic products. Some of these shortages will take months to fully materialize, but motor oil, grease, and even basic waste bags may start disappearing from shelves.
⏳ Even if the Strait of Hormuz reopened tomorrow, it would take twelve to eighteen months to pump wells, refill storages, and restore production chains.
📈 U.S. consumer prices rose at a 3.8 percent annual rate in April, the fastest since May 2023. The Producer Price Index jumped 6 percent year over year in April, the biggest increase since December 2022. Monthly wholesale prices surged 1.4 percent, far above forecasts, indicating that cost pressures are broadening well beyond gasoline and will soon hit a wide range of goods.
⚠️ The current CPI and PPI jumps mark the early phase of a larger cost-of-living squeeze. As missing goods propagate through economies and production networks, further price increases are already locked in, with unpredictable second-order consequences for housing, manufacturing, and financial markets.
💵 Meanwhile, as we indicated from the beginning of this conflict more than a month ago, US bonds reflect the unease of this war. For the first time since 2007, the U.S. government has auctioned 30-year bonds with a yield of 5 percent, marking a significant shift in long-term borrowing costs.
🏛️ Domestic political reactions over conflict: JD Vance and Obama.
🗣️ Vice President JD Vance disputed claims that President Trump said he was not interested in the financial situation of Americans. “I don’t think he said that,” Vance said. “I think that’s a misrepresentation of what the president said”. The truth is President Trump, when asked by a journalist whether the US financial situation was forcing him to strike a deal, He replied, word for word: ‘The only thing that matters when we talk about Iran is that they don’t have a nuclear weapon. I don’t care about America’s financial situation.’
🏛️ Former President Barack Obama said the U.S. successfully constrained Iran’s nuclear program without military action, stating: “We pulled it off without firing a missile. We got 97% of their enriched uranium out. There’s no dispute that it worked and we didn’t have to kill a whole bunch of people or shut down the Strait of Hormuz.”
⚖️ Iran’s parliament will consider enriching uranium to weapons‑grade (90%) if the U.S. attacks again, said MP Ebrahim Rezaei, parliamentary National Security spokesperson.
🕌 The Arab Emirates still seems to be actively involved in the conflict against Iran. Israeli Prime Minister Benjamin Netanyahu recently carried out an unannounced visit to the United Arab Emirates, where he held a meeting with the country’s president, Sheikh Mohammed bin Zayed Al Nahyan, according to CBS News.
❗ However, a few hours ago, an official statement from the UAE has denied that Netanyahu or any Israeli military delegation have visited the country.
Trump’s trip to China: what we know so far.
🤝 “We should be partners, not rivals,” Chinese President Xi Jinping said as he welcomed U.S. President Donald Trump in Beijing on Thursday morning.
🗨️ In his opening remarks, Trump expressed optimism about bilateral ties, saying the relationship between the United States and China “is going to be better than ever before.”
📺 CNBC reported that Xi said the world is watching the Trump‑Xi meeting and raised whether the U.S. and China can avoid the “Thucydides Trap,” per CCTV’s official English translation.
📚 The “Thucydides Trap” describes how rivalry between a rising power and an established power can escalate into war. Graham Allison, who popularized the concept, told CNBC he expects the trade truce reached by Trump and Xi in South Korea last fall to be formalized into an agreement.
🏛️ According with Politico, Republican China hawks have largely fallen silent as President Trump pursues deals with Beijing, shifting GOP orthodoxy toward accommodation.
🔁 Trump has approved moves seen as softer on China, green‑lighting AI chip sales, permitting a TikTok deal, and adopting a more conciliatory National Defense Strategy. Traditional hawks (e.g., H.R. McMaster, John Bolton, Mike Pompeo) have lost influence; current advisers (Pete Hegseth, VP J.D. Vance, David Sacks) back closer cooperation and looser export controls.
⚖️ Approval of Nvidia’s H200 chips for China and other tech decisions worry lawmakers about espionage and eroding U.S. AI leadership; Congress has pushed export‑control bills but none passed. Some Republicans now publicly support limited tech exports to retain influence or keep China reliant on U.S. tech.
🛡️ Pentagon view: Defense officials still treat China as the pacing military threat and seek to reduce dependency on Chinese rare earths and drone tech by supporting U.S. suppliers.
Senate Narrowly Confirms Kevin Warsh as Fed Chair:
⚖️ The confirmation battle plays out against a backdrop of accelerating inflation, the Iran war’s oil price shock, and Trump’s congressional majority being on the line in November.
✅ The Senate voted 54 to 45 to confirm Kevin Warsh, the slimmest margin ever for a Federal Reserve chair. Only one Democrat, John Fetterman of Pennsylvania, crossed party lines. The polarized vote reflects deep Democratic fears that Warsh will bow to President Trump’s demands to slash interest rates ahead of the midterm elections.
📊 The vote came hours after a report showed wholesale prices jumped 6 percent annually, exceeding all forecasts. Consumer prices had already shown sharp increases in gas, groceries, rents, and airfares.
🎯 Trump publicly expects the new chair to lower borrowing costs right away, having repeatedly attacked outgoing Chair Jerome Powell for not cutting fast enough. Warsh vowed during his confirmation to keep monetary policy strictly independent, setting up a direct test of the Fed’s autonomy.
🔍 A growing number of Fed officials want to explicitly signal that the next rate move could be a cut or a hike. This indicates Warsh will face stiff internal resistance if he tries to force premature rate reductions that policymakers do not view as justified.
📉 Warsh has also argued for shrinking the Fed’s 6.7 trillion dollar balance sheet over time. He told lawmakers that rate cuts are fairer than expanding the balance sheet because the benefits are more broad-based.
🔁 Powell said he will remain on the Fed board after his chair term ends on Friday but keep a low profile.
Market View.
📈 Markets are regaining optimism, with E‑mini S&P 500 and Nasdaq 100 futures reaching fresh record highs, currently trading at 7,485 and 29,630 respectively.
🛢️ There is a degree of relief in global tensions, reflected in lower oil prices. Spot Brent crude, which moved above $108 per barrel on Tuesday, has fallen below $105 in recent hours and is now edging slightly higher to around $105.40.
💱 The US dollar index (DXY) continued to strengthen during yesterday’s session, climbing above 98.50, but has eased in recent hours to 98.41. This move coincided with support holding in EUR/USD around the 1.1700 level, from which the pair has rebounded to approximately 1.1720.
📈 The US bond market has seen a rise in long‑term yields, with the 10‑year Treasury yield reaching 4.50% and the 30‑year yield touching 5.00%.
🌍 European futures are also opening in positive territory. DAX 40 futures have moved above 24,360, while Euro Stoxx 50 futures are approaching the 5,900 level.
🔮 Gold futures are forming an interesting technical pattern, potentially a bullish wedge, while trading sideways around $4,700 per ounce.
💥 Meanwhile, Bitcoin suffered a setback yesterday, falling to $78,800 and losing the $80,000 support level highlighted in our previous report. It is currently attempting a rebound, moving back towards $79,800.
