Aug 24 – Aug 30

The U.S.–Iran war entered its sixth month with Washington shifting emphasis from military pressure to financial isolation. The Treasury warned governments and companies that continued business with Tehran could cost them access to the U.S. financial system, while new sanctions reached an Egyptian bank’s branches involved in Iran-linked transactions. Reuters described the campaign as an effort to sever Iran’s economic lifelines, with the timing calibrated to a U.S.-hosted G20 finance meeting focused partly on sanctions and global imbalances.

The Strait of Hormuz became the practical test of whether pressure can produce negotiations. Iranian officials said reopening the waterway would require an end to the war, removal of sanctions, an end to the blockade of Iranian ports and compensation. Tehran also agreed in principle to an Oman-backed corridor, but only under conditions Washington has not accepted. Qatar’s prime minister traveled to Tehran as regional diplomacy accelerated, while the White House denied that negotiations were underway and said it was keeping all options open.

The market response was counterintuitive: Brent fell more than 5% for the week and WTI more than 4%, as traders prioritized demand concerns and Federal Reserve signals over immediate supply disruption. Yet QatarEnergy’s force majeure on LNG deliveries to Italy was extended into early November, and tanker attacks continued to raise maritime and insurance risks. The implication is a split market: crude prices are discounting weaker demand, while gas, shipping and sanctions remain exposed to a sudden escalation.

Nvidia again exceeded expectations, reporting fiscal second-quarter revenue of approximately $96.2 billion, up 106% from a year earlier, with data-center revenue more than doubling. Its outlook pointed to roughly $104 billion to $108 billion of third-quarter sales and about 70% revenue growth in the following fiscal year. The release drove a roughly 5% post-earnings gain and lifted semiconductor peers, with TSMC viewed as a primary manufacturing beneficiary.

The more consequential development was how deeply Nvidia is becoming tied to the financing of the capacity it supplies. Reuters reported that the company agreed to guarantee up to $105 billion supporting OpenAI’s lease of a massive Ohio data center over 20 years. That commitment sits alongside potential debt financing of as much as $80 billion to $100 billion by Broadcom for AI chip supply tied to Anthropic, and a $45 billion-scale computing agreement between Anthropic and Nscale. AI demand is therefore moving beyond conventional corporate capex into long-duration, supplier-backed financial structures.

The supply chain is expanding accordingly. TSMC’s July revenue rose 44.7% year over year, while advanced packaging allocations were being reshaped to accommodate AMD and Nvidia demand. TSMC also accelerated plans for higher 3-nanometer output and its next-generation 1.4-nanometer facility. That sets up a market still willing to fund capacity aggressively, but increasingly sensitive to whether end customers can convert enormous compute commitments into durable revenue.

The week’s central market tension was not an equity collapse but the persistence of restrictive long-term rates. July core PCE inflation came in around 3.7% year over year, slightly hotter than expected, reinforcing the view that price pressures remain sticky ahead of the September FOMC meeting. Markets assigned roughly one-in-three odds to a rate increase, while the 10-year Treasury yield held near 4.7% and the 30-year briefly reached about 5.31% before ending near 5.27%.

That yield structure constrained broad risk appetite. The S&P 500, Dow and Nasdaq drifted around midweek, while the prior weekly recap showed declines of approximately 1.4%, 0.8% and 2.0%, respectively, with growth, cyclical and rate-sensitive sectors under pressure. U.S. Aggregate bonds also slipped, as did investment-grade and high-yield credit. The dollar index fell about 0.8 points despite the rise in long yields, suggesting that the market was not treating higher rates as an uncomplicated expression of U.S. policy strength.

Jackson Hole added an event risk to an already tight valuation environment, with investors awaiting Chair Kevin Warsh’s keynote and weighing a proposed U.S. government debt buyback plan. Nvidia’s earnings temporarily revived growth exposure, but the broader setup remains one in which strong corporate results must outrun the discount-rate burden. This week, the key question is whether policy communication can ease the long end without validating the inflation concern that put it there.

Ukraine’s air war intensified on both sides. Ukrainian forces struck Russian command posts near occupied Donetsk and attacked the Bashneft-Ufaneftekhim refinery in Ufa, while Russia launched a sustained ballistic barrage against Kyiv. Ukraine said it intercepted seven Iskander-M or North Korean-made KN-23 missiles. President Volodymyr Zelensky said that, over the preceding week, Russia had launched nearly 2,000 attack drones, more than 1,600 glide bombs and 31 missiles.

The pressure is beginning to reach Russia’s domestic energy system. Repeated Ukrainian drone attacks forced refinery shutdowns, leaving gasoline production at roughly 70% of domestic consumption and raising the prospect of shortages and higher prices. Ukrainian sources also said Moscow was preparing to conscript 300,000 recruits in 2026 and another 300,000 in 2027, pointing to a conflict still absorbing manpower and industrial capacity rather than moving toward de-escalation.

Diplomacy produced signals, but not a breakthrough. Deputy Foreign Minister Sergei Ryabkov referred to proposals recognizing “realities on the ground,” while CIA Director John Ratcliffe traveled to Moscow to press for a deal before military and economic conditions worsen. The United States also moved toward broader pressure on Russia: the Senate passed an 86–11 bill targeting energy revenues, financial institutions and the shadow fleet, with tariffs of up to 100% on major buyers of Russian oil and gas. The coming week therefore begins with negotiations still possible, but battlefield and sanctions incentives moving in opposite directions.