Clinging to the Possibility of Renewed Traffic Through the Strait of Hormuz
August 26, 2026
In two more days, the war between the United States and Iran will be seven months old in a conflict initially estimated to last five weeks at top. Seven months represents a sixth of the duration of U.S. participation in the second world war from Pearl Harbor to Hiroshima. There have been many elusive moments during the past seven months when an enduring settlement to the Middle East conflict seemed in reach, each based on comments both openly made and reportedly said by negotiators from both sides. Such talk has repeatedly proven a sufficient impetus to depress the price of oil initially, and the latest ray of hope from word out of Oman that renewed talks with Iran have resumed and unconfirmed corroboration from U.S. sources was again enough to depress the price of West Texas Intermediate crude oil by 2.8% overnight and by almost 9% early this week to $80.06 per barrel. Hope springs eternal, but many previous false starts and this week’s sudden collapse of trade talks between Canada and the United States in a different set of negotiations argue against the premise that this time will end more successfully. For the record, traffic today through the all-important Middle Eastern waterway barely had a pulse. The one piece of truly good news is that at $80, the cost of unrefined oil remains far below the levels imagined back in March, and actions taken by China can be thanked for that.
Later this morning, several potentially market-moving U.S. data get released: a revised estimate of U.S. GDP and the 2nd quarter personal consumption price deflator, monthly personal income, personal consumption expenditures and the associated PCE price deflator, and also durable goods orders. In the meantime as investors await these reports, the dollar shows mixed overnight movement ranging from -0.2% against the Australian dollar and Japanese yen to +0.3% versus the Swiss franc and kiwi. Most ten-year sovereign debt yields are between a basis point higher such as the U.S. Treasury or unchanged such as the British Gilt and German Bund. Stock markets today closed 0.6% higher in Japan, China and Hong Kong. Euroland share prices show a smaller rise, and U.S. stock futures show nil change with today’s scheduled Nvdia earnings announcement and Friday’s speech by Fed Chairman Warsh in Wyoming adding further suspense. Bitcoin and gold are marginally lower.
Aside from the aforementioned U.S. releases, announced data involving other economies continued to be light in volume. Such will pick up tomorrow and become very heavy on Friday.
Australian consumer price inflation in July exceeded expectations. The CPI jumped 1.0% above June’s level and again posted a 12-month increase (3.5% overall and 3.6% in the trimmed mean core measure) that exceeds the 2-3% targeted corridor. Coming on the heels of yesterday’s hawkish Reserve Bank of Australia Board minutes, this release keeps the possibility of a near-term interest rate hike very much in play.
Swedish producer price inflation, which had been negative in the last two months of 2025 and first two months of 2026, fell a percentage point below June’s 3-month high to a 3-month low in July of 6.4%.
Icelandic producer price inflation settled back to a 2-month low of 18.6% in July from 19.4% in June.
In July with a reading of -48, Great Britain’s distributive trades index gave back most of its sharp June improvement to -26 from -54 in May.
The ZEW index of investor sentiment toward the Swiss economy rose to a 9-month high of 12.1 in August and the second best reading since the first month of 2025.
Officials at the Bank of Thailand left the one-day bilateral repo rate unchanged at 1.0%. The sixth and most recent 25-basis point cut was made a half year ago. A peak of 2.5% had been maintained from July 2023 through October 2024. The statement explaining today’s unanimous decision “assesses that an accommodative monetary policy stance, coupled with targeted financial measures, has helped support the economic recovery.” CPI inflation of 1.95% last month was in the middle of the 1-3% target but “is expected to rise through the first quarter of 2027 due to the effects of El Niño and gradual cost pass-through” before subsequently returning to “low levels.”
Released U.S. data failed to move the needle. Real GDP growth in the second quarter was left unrevised at an annualized quarter-to-quarter rate of 1.5%. Government spending, net foreign demand and inventory building combined to exert a 2.02 percentage point drag on the quarterly growth rate. In year-on-year terms, real GDP went up 2.1%, down from 2.7% in the first quarter and the same as the 2.1% advance between the second quarters of 2024 and 2025. In July, personal income grew by a faster-than-projected 0.4%, but personal consumption expenditures went up only 0.2%, their slowest monthly rise so far this year. The PCE price deflator went up 3.7% year-on-year, same as in June and a tad above analyst forecasts. Inflation measured by the core PCE price deflator of 3.3% was also the same as in June and well above the Federal Reserve target of 2%. A third release covering U.S. durable goods orders jumped by a greater-than-expected 1.1%. However, the subset of non-defense capital goods excluding aircraft, which is a good leading indicator of future business investment, increased by a considerably smaller-than-expected 0.2% in the latest month. And lastly, mortgage applications last week fell by 1.0%, constituting the fourth decline in five weeks and bring the five-week cumulative change to a drop of 7.2% in this period of elevated mortgage rates. The 30-year fixed mortgage rate was 6.78% last week and on average for the whole five-week period.
Copyright 2026, Larry Greenberg. All rights reserve.
Tags: Australia CPI, Bank of Thailand, U.S. GDP and PCE price deflator
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