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strikeJul 21, 2026

Futures Jump As Chipmakers Surge After Japan , Korea Bounce

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Futures Jump As Chipmakers Surge After Japan , Korea Bounce US stock futures are higher led by Tech after a strong bounce in chip stocks in Japan (memory stock Kioxia traded limit up after trading limit down on Friday and Monday was a holiday) and Korea, as evidence mounts that Momentum / Semis pullback have bottomed, with supportive price action elsewhere in Asia and Europe, though the JPM EU Trading Desk is not yet seeing follow-through buying in Semis.  As of 7:20am ET, S&P futures are 0.5% higher, lagging the 1.4% bounce in Nasdaq futures helped by a report that TSMC is planning price hikes, although it is unclear if the early ramp will persist amid the re-escalating war with Iran which overnight saw Houthis impose a blocakde on Saudi Arabia. In premarket trading, most Mag 7 names are higher with semis leading (SOXX +4%). Cyclicals ex-Energy are leading Defensives with both Staples and HC net lower and AI boosting Industrials and Utils. WTI crude is trading near its highs, boosting Energy as all 3 commodity complexes move higher with silver the standout which has traded in tandem with the AI theme. The yield curve is twisting steeper with yields ranging from -1bp to +1bp with USD flat. Today’s macro focus is on the weekly ADP number and regional Fed activity.  US economic data calendar includes ADP weekly employment change (8:15am) and July Philadelphia Fed non-manufacturing index (8:30 am). Fed speaker slate is blank during July 18-30 external communications blackout period around the July 28-29 FOMC meeting. In premarket trading, chipmakers and other AI-related firms rebound after the sector suffered some recent weakness. Movers include Intel (INTC +5.5%), Sandisk (SNDK +8.1%), Micron (MU +6.8%), CoreWeave (CRWV +3.8%), GE Vernova (GEV +2.5%) as the entire trillion-dollar sector continues to trade like a rabid pennystock. Tesla and Nvidia are leading Magnificent 7 stocks higher during the AI rebound (Tesla +1.2%, Nvidia +1.1%, Alphabet +1%, Meta +0.4%, Amazon +0.2%, Apple -0.4%, Microsoft -0.7%). In corporate news, BlackRock’s coming debt sale of more than $12 billion for a Meta Platforms data center is the result of years spent transforming a public investments giant into a heavy hitter in private markets too. The Paramount-Warner deal, paused Monday by a federal judge, faces a legal hurdle that risks putting the deal on hold for months at a cost that could quickly climb to billions of dollars. Nike’s soccer boss said the World Cup ending “was not what we dreamed,” as Spain and Argentina — both Adidas teams — faced off in the final after beating Nike-clad teams in the semifinals. Chipmakers are leading the gains in premarket trading, along with associated memory storage and semiconductor equipment names, helped by a report that TSMC is planning price hikes. Tech was also buoyed by upbeat Taiwan and South Korean export data, supportive Wall Street commentary (virtually every bank is begging for a momentum bounce knowing well that if one doesn't come it will get very ugly) and an absence of new geopolitical flashpoints. Even so, nagging worries about margin debt and inflation loom for the AI trade.  To wit, according to the trading desk at UBS, the sharp selloff in momentum stocks may be nearing its end, creating an opportunity for investors to start rebuilding positions in AI and semiconductor shares. “While volatility is likely to remain high given the elevated concentration still present in parts of the market, the correction has been both deep and lengthy enough to alleviate some valuation concerns,” said Santiago Mateo Yanguas, head of equity at CaixaBank AM. South Korea’s exports data adds further support for chips, with semiconductor exports climbing by a perfectly sustainable about 181% YoY for the first 20 days of July. Taiwan’s June export orders from the US rose nearly 84% year-on-year, the fastest pace on record. Whether the AI rally can extend will depend heavily on the reporting season and, as Bloomberg highlights, the biggest concern is leverage with US margin debt rising 49% year-on-year in June to a record high. AI capex “has stretched hyperscalers to the edge of acceptable investor limits,” notes JonesTrading chief strategist Mike O’Rourke.  Others were more bearish: equity investors should look to reduce some exposure after this earnings season, according to HSBC’s Max Kettner, who warns that stretched sentiment, a fading fiscal impulse, and US midterm election uncertainty could trigger a pullback.  TSMC is set to raise prices for advanced and mature chip production services by up to 10% in 2027 to reflect rising costs, Nikkei Asia reports. It follows a report last week of ASML raising prices for its equipment, for which TSMC is ASML’s largest customer. While price increases underpin the demand story, it will stoke concerns of inflationary pressures and traders will be on watch for corporate margin hits from memory costs during this earnings season. Focus will soon shift to the start of the reporting season for Big Tech firms, where AI hyperscalers will update investors on their capital spending plans. Alphabet Inc. reports on Wednesday, while Microsoft Corp., Meta Platforms Inc. and Amazon.com Inc. are due next week. “The next test is no longer whether AI demand exists, but whether pricing, margins and cash flow can justify the capex bill,” said Florian Ielpo, head of macro at Lombard Odier Investment Managers. “If they can, the rebound should broaden. Otherwise, volatility remains the regime.” A question that investors are asking themselves is whether now is the time to sell chips and rotate toward hyperscalers, which have underperformed semiconductors this year, according to Alexandre Drabowicz, chief investment officer at Indosuez Wealth Management in Paris. “Our view is that one needs to be invested in both,” Drabowicz said. “Alphabet’s earnings this week will be a real bellwether for the industry and its capacity to monetize AI. We believe the market underestimates how fast these companies will be able to monetize.” Global trade faces a fresh headache as the Panama Canal moves to curtail some vessel-booking slots because of water-supply challenges. Overnight, the Trump admin vowed to impose a fresh 50% tariff on some Canadian goods over what it said was unfair treatment of American alcohol, cars and dairy.  In politics, Defense Secretary Pete Hegseth is set to testify before lawmakers to defend the Trump administration’s request for billions of dollars in additional money for the Iran war. Trump met with a pair of key Republican senators on Monday evening to discuss a path forward on legislation that would override state laws on AI.  A federal appeals court denied Joe Biden’s request for a temporary block to stop the Justice Department from turning over tapes and transcripts to the Heritage Foundation. Seperately, the DOJ has launched a new investigation into Harvard University, alleging that some of its financial aid programs violate civil rights law by excluding American citizens.  European stocks are up too, the Stoxx 600 rising 0.2%, also being led by the technology sector. After two days in the red, as gains in the technology sector and a slew of robust earnings counter news about the continuing US-Iran clashes.  Here are the biggest movers Tuesday: Mitie Group shares surge as much as 42% after agreeing to a takeover by OCS Group at a big premium to Monday’s close. The facility management company’s shares remain below the offer price Babcock rises as much as 8.3%, leading gains amoung European defense stocks on Tuesday after the UK’s new prime minister Andy Burnham told NATO Secretary General Mark Rutte that John Healey’s appointment as Chancellor was a “signal of his intent” on defense Var Energi shares gain as much as 5.9% and BlueNord rises as much as 6.7% after the former made a $1.3 billion offer to acquire the latter; Var Energi also reported 2Q results and reaffirmed its production forecast Bossard shares jump as much as 11%, hitting their highest level since October 2024, after first-half results from the maker of fastening devices beat expectations, which analysts said provides better visibility on the full-year outlook Genuit Group gains as much as 3.2% after analysts at Stifel initiated coverage on the maker of plastic piping systems with a buy rating and said they see an inflection point coming, driven by regulatory and structural drivers Basic resources stocks gained the most in the Stoxx 600 index as copper headed for its highest close since mid-June on signs that supply conditions in China are continuing to tighten. Gold touched its highest level in a week on dip-buying Boliden drops as much as 7.6%, to the lowest since May 5, after the mining company delivered revenue and operating profit below expectations in the second quarter, along with negative free cash flow Wartsila shares drop as much as 4.6% as JPMorgan flags the company lowering its demand outlook for the Energy division. That’s overshadowing the company’s strong beat on orders in the second quarter Schindler shares fall as much as 6.1%, the most in five months, after second-quarter revenues missed estimates, offsetting a better-than-expected margin performance Julius Baer shares declined as much as 5.3% as beats on net income and assets under management were overshadowed by the lack of update on a regulatory review and any subsequent share buybacks Jungheinrich shares drop as much as 5.5% after Germany’s financial regulator BaFin opened an accounting review on whether the company breached financial-reporting rules in connection with the planned sale of the company’s Russian business Asian stocks rose for the first time in four sessions as investors rush back into chip stocks after a recent rout.  The MSCI Asia Pacific Index jumped as much as 2.3%, the most since July 15, led by TSMC, Samsung and SK Hynix. South Korea and Taiwan led the gains in the region, with most other markets also climbing higher as investor sentiment improves. Taiex’s 3.6% rise was the most in three weeks. Japan’s Nikkei 225 rose 2.7% after slipping into correction territory on Friday. While investors continue to debate whether AI spending is justified, the recent tech selloff has drawn some back to hunt for bargains. Several megacap earnings due later this week, including Tesla and Alphabet Inc., will shed further light on whether the AI-driven rally can regain momentum. “The market has already undergone a fairly substantial correction,” said Ikuo Mitsui, a fund manager at Aizawa Securities. “At the same time, corporate earnings have held up reasonably well and have proved more resilient than expected.” In FX, the dollar is fluctuating, albeit in a narrow range. The yen is lagging, while the Norwegian krone and Aussie dollar are stronger. In rates, treasury yields are little changed in early US trading with the yield curve steeper, tracking similar price action across most developed sovereign bond markets, with oil prices and stock index futures higher inside Monday’s ranges. Tiny overnight yield ranges included less than 2bp for 10-year. US session has no major calendar events. Yields across tenors remain within about a basis point of Monday’s closing levels, the 10-year just under 4.60%. Treasury futures volumes through 7am New York time were 60% to 90% of 20-day average level.  IG credit new-issue calendar includes is blank so far, but at least one potential borrower stood down Monday as three issuers raised a combined $4.5 billion, and may return. Treasury coupon auctions this week include $13 billion 20-year reopening Wednesday and $21 billion 10-year TIPS new issue Thursday. Germany is underperforming at the long end in Europe. UK government bonds ticked higher as investors awaited fresh policy details from new Prime Minister Andy Burnham. Weak economic data dimmed bets on higher interest rates.  In commodities, oil prices have been mostly lower for the session so far and Brent is sitting a little short of $89/barrel, while gold has come off its high but is still in the green and above $4,000/oz. The US economic data calendar includes ADP weekly employment change (8:15am) and July Philadelphia Fed non-manufacturing index (8:30 am). Fed speaker slate is blank during July 18-30 external communications blackout period around the July 28-29 FOMC meeting. Market Snapshot Top Overnight News President Trump is nearing a decisive fork in the Iran war, with U.S. and Israeli officials envisioning only two viable endgames: Option 1: Pursue a new 10-day ceasefire aimed at reopening the Strait of Hormuz. Option 2: Launch a massive joint military campaign with Israel to force Tehran's capitulation. Axios Vessel traffic through the Strait of Hormuz has slumped since U.S. President Donald Trump’s blockade took effect last week, with shipowners increasingly avoiding one of the world’s most important energy corridors as fighting between the U.S. and Iran intensifies. CNBC China is mounting one of its broadest efforts in years to steady the stock market, with regulators, state-backed investors, insurers and asset managers all moving to shore up confidence after a selloff in tech shares. BBG China’s cabinet pledged to ensure the country will meet its full-year economic goal and to forge ahead with implementing policies, after growth slipped below the official target range in the second quarter. BBG Chinese regulators are considering tightening export controls on artificial intelligence and semiconductor technologies, as the US-China rivalry intensifies in cutting-edge AI. FT The US vowed to impose a new 50% tariff on some Canadian goods, citing unfair treatment of American products. The levies would apply to items including milk and beer but exempt energy, potash and critical minerals. BBG London Stock Exchange plans to launch a 24/5 trading venue to support digital, algorithmic and agentic trading. It’ll operate separately from LSE’s Main Market, with ETPs set to debut next year. BBG OpenAI and Anthropic executives are sounding the alarm about the rise of cheap AI, particularly powerful new models produced in China, suggesting they will lead to a “dystopian” AI future and present unacceptable security risks without regulation. WSJ The cost of protecting Oracle Corp.’s debt against default reached a fresh multi-year high on Monday while its existing bonds sold off, as doubts grew over whether the company’s massive investments in artificial intelligence will pay off. BBG US President Trump signed an order to identify and fix potential national security vulnerabilities by requiring defence contractors to screen their supply chains, aiming to stop weapons makers from working with certain foreign suppliers including China. A more detailed look at global markets courtesy of Newsquawk APAC stocks traded mixed following the subdued handover from the US, where most major indices declined as oil prices and yields climbed amid the ongoing geopolitical backdrop, although the Nasdaq showed some resilience amid a bounce in tech and telecommunications. ASX 200 lacked firm direction with price action contained within relatively tight parameters in the absence of notable data or key macro drivers. Nikkei 225 rallied on return from the long weekend, with some bargain-hunting after last Friday's slump. KOSPI shrugged off earlier indecision and rallied amid a tech rebound, with notable strength seen in Samsung Electronics and SK Hynix shares. Hang Seng and Shanghai Comp were mixed with price action range-bound as they took a breather after rallying yesterday amid stimulus hopes and China’s “national team” buying close to USD 9bln in equities. Top Asian News Japan's Cabinet approved an economic framework policy document including fiscal plan, which cites BoJ autonomy and lacked sales tax decisions. Japan is reportedly to relax rules surrounding bank lending for M&A and incentivise pension funds to invest more in alternative assets. New Zealand Inflation Rate QoQ (Q2) Q/Q 1.5% vs. Exp. 1.4% (Prev. 0.9%). New Zealand Inflation Rate YoY (Q2) Y/Y 4.1% vs. Exp. 4% (Prev. 3.1%). South Korea July 1st-20th Exports rose 52.3% Y/Y, Imports rose 20.0% Y/Y and Trade Balance is at a provisional surplus of USD 12.2bln. Taiwan Export Orders (Jun) Y/Y 59.4% (exp. 47.3%). european bourses are mixed and ultimately trading on either side of the unchanged mark. Tentative action which is encapsulated by the tumultuous geopolitical environment and a number of earnings from within the region. European sectors hold a slight negative bias. Tech outperforms followed by Basic Resources, whilst Optimised Personal Care and Media reside at the bottom of the pile. The Tech sector continues to bounce back from recent losses, following a similar theme seen in the APAC session, where the KOSPI gained c. 3.5%. Top European News UK government to remove VAT on electricity bills from October 1st, funded by cancellation of the Digital ID programme, as part of new tax cut measures. UK PM Burnham reportedly to slash business rates for the hospitality sector by 20% within days, Huffington Post reported. Additionally, a GBP 2 cap on bus fares is also set to be unveiled as soon as Wednesday. Worldpanel announced grocery inflation and sales (w/e 12th July): Grocery Inflation 2.6% (prev. 3%). FX G10s are mixed against the Buck. Antipodeans lead after a hotter-than-expected NZ CPI; JPY underperforms after the Japanese cabinet excluded a sales tax decision from its fiscal plan. DXY is a touch lower today, with oil prices softer but lacking direction as we await further geopolitical updates. Overnight, Axios reported that senior US and Israeli officials are claiming Trump’s options were to either promote a new 10-day ceasefire or launch a full-scale war on Iran. Elsewhere, Fox reported Trump will decide in the coming days whether to expand military operations against Iran. ING opines USD risks remain to the upside, given the aforementioned factors. Given the above, focus remains on incoming Gulf newsflow with a light calendar ahead of the Fed’s meeting next week. DXY remains below the 21DMA at 100.05, currently between 100.90 and 101. GBP in focus today after UK PM Burnham appointed former Defence Minister Healey as Chancellor (see 09:50 analysis for more detail). Elsewhere, UK jobs saw the unemployment rate remain steady at 4.9%, whilst the Employment Change topped expectations, while the wages components were flat/very slightly firmer. Overall, a report which will have little impact on the BoE, ahead of CPI on Wednesday and Flash PMIs on Friday. GBP takes a breather just above 1.3420 in Cable, and a little weaker just above 0.85 in the EUR cross. JPY is on a weaker footing despite the aforementioned subdued Dollar and softer oil prices. Overnight, Japan's Cabinet approved the economic framework policy document, including a fiscal plan, which cited BoJ autonomy but lacked a sales tax decision. Amid the uncertainty given the lack of a funding plan, USD/JPY resides towards the upper end of a 162.43-162.70 range. Antipodeans hold on to the spoils of the prior day's outperformance, with Aussie propped up by firmer metals whilst the Kiwi is leading after firmer-than-expected New Zealand CPI data. AUD/NZD is a modest touch lower, Aussie and Kiwi both +0.4% against the Buck. Fixed Income Global fixed income benchmarks trade range-bound, in line with energy prices, despite the risk-on tone seen across the equity space. Equities seem to enjoy the reporting around a possible 10-day ceasefire, with recent reporting hinting that the US is demanding a longer ceasefire. Gilts (+1 tick) trade higher, despite the announcement of former Defence Secretary Healey as Chancellor. Thus far, gilts have taken this as fairly positive, possibly taking comfort in the fact that he used to work in the Treasury in past governments. In terms of Burnham's policy, Bloomberg reported that the UK government will remove VAT on electricity bills from October 1st, funded by cancellation of the Digital ID programme. There have been contradictory reports over whether this measure will be fully funded. The Times reported that this will be fully funded; however, the OBR said the GBP 1.8bln figure for the ID scheme was unfunded, while former UK minister Jones suggested that Burnham's cut is also unfunded. More recently, the Huffington Post reported that Burnham is to slash business rates for the hospitality sector by 20%, while a GBP 2 cap on bus fares is also set to be unveiled soon. On the data front, the ONS released its May employment report; employment change 147k (exp. 85k, prev. 100k), unemployment change 4.9% (exp. 4.9%, prev. 4.9%). Despite the strong labour report, gilts have failed to react, given the focus on politics. Bunds (-10 ticks) rotate in a 124.59-124.81 range. Focusing on the short-end, the yield currently trades outside of the 2.52-2.76% range, driven by the recent leg higher in energy prices. Brent has recently returned above the USD 90/bbl mark, resurfacing worries of an energy pass-through into inflation. ING says that rates can take a hawkish view, with the 2yr euro swap rate touching 3%, because the EZ growth picture continues to recover. Additionally, implied bond volatility is at lower levels, compared to the early stages of the Middle East conflict. USTs (+1 tick) lack direction given the quiet docket this week, heading into the Fed policy announcement next week. Germany sells EUR 4.553bln vs exp. EUR 6bln 2.90% 2031 Bobl: b/c 1.48x, average yield 2.89%, retention 24.1%. The UK sells GBP 5bln 4.00% 2029 Gilt: b/c 3.42x (prev. 3.35x), average yield 4.463% (prev. 4.238%), tail 0.3bps (prev. 0.2bps). Commodities Geopolitics remain fluid with constructive and escalatory updates on the US-Iran front. On the former, a 10-day ceasefire proposal was pitched, while Iran confirmed ongoing mediation talks, which keeps alive the possibility of a return to the June interim MoU. On the other hand, last night was the 10th consecutive day of US airstrikes, whilst Iran continues targeting the region and reiterated that the Strait of Hormuz is closed. US President Trump is expected to decide in the coming days whether to expand military operations against Iran and return to full-scale combat, a senior US official told Fox News. Meanwhile, senior US and Israeli officials are claiming Trump only has two realistic options: either promoting a new 10-day ceasefire with the aim of reopening the Strait of Hormuz, or launching a full-scale war on Iran, Axios reported. Further, a US official said if US President Trump decides to expand the war, the strikes will include Tehran and nuclear sites, according to Al Arabiya. Crude oil futures are trading subdued as market participants weigh emerging diplomatic de-escalation signals against ongoing military exchanges in the Middle East. Brent crude futures fell to the bottom end of a USD 88.08-89.45/bbl range while WTI similarly waned to the lower end of a USD 81.64-83.05/bbl range. Also on the supply side, NHC reported that Tropical Storm Bertha has strengthened, situated right in the Gulf of Mexico. Dutch TTF bucks the trend and has edged higher, back above the EUR 59.23/MWh mark, in the European morning, with analysts suggesting gas will be impacted more by the Middle East situation. Precious metals are on a firmer footing as the Dollar and inflation expectations ease with oil prices. Spot gold trades towards the upper end of a USD 3,999/oz to USD 4,084/oz range. Spot silver surges 4.5% at the time of writing as it rises above USD 59/oz vs Friday’s 54.77/oz base. Base metals also cheer the pullback in the Dollar alongside expectations of Chinese stimulus following recent weak economic data. 3M LME copper is firmer by 1.5% at the time of writing and towards the upper end of a USD 13,603.73- 13,840.00/t range. UAE's ADNOC has approved a USD 6.2bln project to boost natgas production, Bloomberg reported. Goldman Sachs said Brent may rise above USD 120/bbl in FY26 Q4 if Hormuz remains disrupted. Trade/Tariffs The US is imposing an additional 50% tariff on certain products of Canada including some USMCA products, to counter Canadian bias against US commerce with respect to alcoholic beverages, dairy, motor vehicles. In response, Canadian PM Carney said Canada is ready to engage intensively to address issues with the US and said we're ready to talk with the US about modernising the USMCA. Additionally, the Ontario Premier said that Canada should impose retaliatory tariffs against the US. China is weighing tighter export controls on AI models and chips, according to FT. Central banks ECB Bank Lending Survey (Jul): Euro area banks reported a moderate net tightening of credit standards for loans or credit lines to enterprises in Q2'26. Geopolitics: Middle East It was Iran which proposed the 10-day ceasefire, i24's Stein reported, citing sources. The US said to be demanding a longer ceasefire and demanding even partial navigation of the Strait of Hormuz. The goal of these 10 days, according to the two sources, is to find a solution for the Strait of Hormuz. The mediators conveyed the proposal to the US and even added additional components to it during the talks they held with Washington and Tehran so that it would be between the territory controlled by Oman and the territory controlled by Iran and through which ships could pass. US Energy Secretary Wright said they will continue to attack Iran and are ensuring the flow of oil, gas and other products through the Strait of Hormuz with or without Iran's cooperation. Wright said they continue to undermine Iran's offensive military capabilities and that President Trump wants to end the conflict with a peace deal, but this will require cooperation from both sides. US CENTCOM announced another round of strikes against Iran in which US forces struck Iranian military command centres, maritime capabilities, missile and drone launch sites and air defence systems to degrade Iran's ability to continue attacking vessels. US airstrikes targeted the centre of Isfahan city and several explosions were heard in Bandar Abbas, Qeshm, Chabahar, Konarak and Shiraz, while air defence systems were activated near Iran's Bushehr nuclear power plant. US likely does not have enough munitions to sustain a prolonged all-out war with Iran — which is already adapting to bypass US defence systems in its attacks across the region, according to an expert cited by The New York Post Iran claimed a strike on a US military data centre in Bahrain and stated that US radar and defence systems in Bahrain were destroyed. Iran also targeted US military facilities at Kuwait's Ahmad Al-Jaber base, US missile systems at Kuwait's Arifjan base, while explosions were reported in the Ali Al-Salem Airbase in Kuwait. Additionally, a central data infrastructure of Amazon (AMZN) in Bahrain was attacked by several cruise missiles. More recently, there have been reports of sirens in Qatar while explosions were heard in Jordan. IRGC said two tankers were hit near the Strait of Hormuz, and that the Strait of Hormuz is closed, while the UKMTO said it received a report of an incident 8NM northeast of Oman's Limah and later announced the crew had abandoned the ship. Yemeni Houthi commander said Saudi Arabia faces two options: either lift the blockade and stop its intervention or continue escalating, which will cost it a lot, Al Mayadeen reported. Israeli Finance Minister Smotrich said "the State of Israel has no interest in joining the conflict between Iran and the US - the current situation is the best for us", Ynet reported. Israel conducted artillery strikes on southern Lebanon, while it stated that the programme of pilot zones in southern Lebanon began on Monday, which was carried out in cooperation with US military and Lebanese armed forces. Furthermore, it will respond forcefully to any violation of the agreement. The Lebanese army entered Zawtar al-Gharbiya as part of the first phase of the pilot zones, Al Hadath reported, while Israeli troops departed the area. Geopolitics: Ukraine Russia’s Defence Ministry said its forces have struck infrastructure used by Ukraine’s military in the port of Odesa, IFX reported. Russia's Kremlin said that Russia will continue targeting vessels involved in supplying Ukraine’s military. Geopolitics: Other  US State Department said the US calls on China to immediately cease its destabilising conduct and condemns China's dangerous and aggressive actions against Philippine Navy personnel at the Second Thomas Shoal in the South China Sea on July 20th. North Korea's Foreign Minister met with Russian President Putin in Moscow on 19th July, according to KCNA. US Event Calendar 8:15am: ADP weekly employment change 8:30am July Philadelphia Fed non-manufacturing index  DB's Jim Reid concludes the overnight wrap Yesterday I discussed the huge developments at the end of last week with Chinese open-source AI sparking another potential “DeepSeek moment”. Overnight Adrian Cox has published a timely report explaining what all the fuss is about. “Open-source AI 101: the battle for the future of AI” is a great insight for generalists into what open models are, how they differ from proprietary models like Claude and OpenAI’s GPTs, and why they are key to the AI boom. It’s on the Deutsche Bank Research Institute website here. I think that if the Chinese model of AI development continues to gain traction, it could have significant implications for the highly capital-intensive, capex-led US approach. As such, the piece is well worth a read. Onto markets, and they struggled to gain traction yesterday, with the S&P 500 (-0.19%) losing ground even as chip stocks stabilised after last week’s rout, while Middle East concerns lingered. There has been a recovery overnight though. On the Middle East conflict there was some hope as a spokesman for Iran’s foreign ministry said that “ideas from some mediators have been conveyed” to Iran, but escalating rhetoric from the Houthis in Yemen as well as from President Trump meant Brent crude still closed +1.27% higher at $89.22/bbl. Meanwhile, global bonds saw a broad selloff, with 10yr Treasury yields closing +4.4bps higher, in part due to a hint of looser fiscal policy from the new UK PM Burnham. 30yr US real yields also hit their highest since 2008.  Starting with Iran, we did see some improvement in sentiment yesterday as Reuters reported that a senior Iranian official had told them that mediators had passed a proposal to Iran, which would offer a 10-day ceasefire to try and revive the interim deal last month. But the headlines weren’t all positive yesterday, and shortly afterwards, oil prices pared back some of their decline after the Houthis said they’d impose a maritime blockade on Saudi Arabia, which risks adding to the oil supply disruption. The mood also wasn’t helped by Trump’s post that Iran “will pay… many times over” for the deaths of US soldiers, while the US has conducted a 10th consecutive night of strikes against Iran overnight. So with different counteracting forces, Brent crude settled +1.27% higher at $89.22/bbl, beneath its morning peak above $91/bbl but well off the lows just above $86/bbl. Overnight, Brent is -0.75% lower.  Back to the bond sell-off and the UK led the way with gilts seeing a sharp underperformance after new PM Andy Burnham said that he would use “any flexibility” within the country’s fiscal rules. Potential options for such flexibility include using up the available headroom under the fiscal rules and using off-balance-sheet structures to fund targeted capital investments. The latter may lie outside the current fiscal rules but would still add to the debt burden. So the comments were seen as opening the way for more borrowing and meant that the 10yr yield ended the day up +8.1bps at 5.03%, whilst the 30yr yield (+8.9bps) closed at 5.74%. This sell-off all happened after he spoke. We’re also expecting some further announcements from the new administration this week, and Burnham said in his first speech as PM that he’d be setting out more measures from today to support with the cost of living. In a surprise move, we then learnt that Burnham had picked John Healey, the former Defence Secretary, as the new Chancellor of the Exchequer. Healey had been voted as one of the more investor-friendly options for Chancellor in a recent Bloomberg survey, though there’s little visibility on his fiscal views. Indeed, his highest-profile recent move was accusing the Treasury of underfunding defence as he resigned from Starmer’s government last month. In other appointments, Burnham picked Ed Miliband as foreign secretary and appointed a close ally, Louise Haigh, as first secretary of state. The latter pick coupled with Healey’s as Chancellor raises the possibility that under Burnham, Number 10 will look to exert more direct control over economic policy. The pound did recover a bit of yesterday’s earlier losses following the news of Healey’s appointment, but it was still down -0.16% against the dollar.  Whilst the UK saw the worst of the bond selloff, it was echoed around the world. In Europe, yields on 10yr bunds (+2.5bps), OATs (+1.9bps) and BTPs (+2.6bps) all moved higher, and for 10yr OATs, that took them up to a post-2009 high of 3.94%. And over in the US, the 10yr Treasury yield (+4.4bps) was up to 4.59%. The sell-off in Treasuries was driven by real yields, with the 10yr real yield (+3.3bps) rising to 2.33%, while the 30yr real yield (+3.4bps) rose to 2.92%, its highest level since 2008. At the same time, investors priced in a more hawkish path for the Fed, with 34bps of hikes now priced in by the December meeting, up +2.3bps on the day. This has now retraced more than half of the declines seen since last week's soft CPI.  US equities struggled to recover amid the ongoing geopolitical uncertainty and rising real yields. The S&P 500 (-0.19%) retreated for a third consecutive session with two thirds of its constituents down on the day. The Philly semiconductor index (+0.60%) did see a modest recovery after its -9.97% slump last week, so it’s no longer more than -20% beneath its record high, as it was on Friday. However, the broader tech mood was still cautious, with the NASDAQ (-0.05%) and Mag-7 (-0.07%) inching lower. And over in Europe, the STOXX 600 was also down -0.30%, with the FTSE 100 (-0.71%) leading the losses amid the broader UK asset underperformance.  However there has been a bounce this morning in Asia with S&P (+0.42%) and Nasdaq (+1.03%) futures both comfortably higher. The tech recovery continues elsewhere as the KOSPI (+4.63%) is leading gains in the region after falling nearly 5% yesterday. Elsewhere, the Nikkei (+2.76%) is also firm after yesterday's holiday. In China, the CSI 300 (+1.76%) and Shanghai Composite (+0.62%) are posting solid gains, while the Hang Seng (+0.03%) is fairly flat alongside the S&P/ASX 200 (+0.08%).  Early-morning data showed that South Korea’s exports surged 52.3% year-over-year during the first 20 days of July, driven largely by semiconductor shipments, which nearly tripled amid sustained demand fueled by the ongoing artificial intelligence boom. This was one of the WOW! charts in my recent pack, with exports at over 50-year highs on a YoY basis. The trend continues.  In other overnight news, the US announced that it will impose a 50% tariff on some Canadian goods. The new tariffs were announced under Section 338 of the 1930 Tariff Act, which has never previously been used. This allows the President to impose duties of up to 50% in response to discriminatory treatment against U.S. commerce. According to US Trade Representative Greer, the new tariffs are due to take force in 30 days and will cover close to $20bn of goods, so a relatively small portion of the over $350bn of annual Canadian exports to the US. Note also that the US administration’s temporary Section 122 global tariff of 10% expires this Friday (July 24), so we may well see more US tariff announcements, especially ones justified by recent Section 301 investigations, in the coming days.  Otherwise, there wasn’t much data yesterday, but Canadian government bonds outperformed after the country’s latest CPI print surprised on the downside. So headline CPI fell more than expected to +2.8% in June (vs. +2.9% expected), and the two core measures followed by the Bank of Canada were also beneath consensus, with median core at +1.9% (vs. +2.1% expected), and trim core at +1.8% (vs. +2.0% expected). So the 10yr yield in Canada only rose +0.8bps on the day, a smaller increase than the +4.4bps jump for 10yr Treasuries.  Looking at the day ahead, it’s a quiet one, with data releases including UK unemployment for May and the German ZEW survey for July. Meanwhile from central banks, the ECB will release their Bank Lending Survey. Q2 earnings season will bubble in the background though. Tyler Durden Tue, 07/21/2026 - 07:39

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    Futures Jump As Chipmakers Surge After Japan , Korea Bounce US stock futures are higher led by Tech after a strong bounce in chip stocks in Japan (memory stock Kioxia traded limit up after trading limit down on Friday and Monday was a holiday) and Korea, as evidence …

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Iran’s foreign ministry spokesman warned Bulgaria on Tuesday against allowing the U.S. to use its territory for military operations against Iran. The Bulgarian government has said it will seek parliamentary approval to station up to eight U.S. tanker aircraft at an air base in the Balkan country, which is a member of NATO and the European Union.

Ministry spokesman Esmail Baghaei said any activity that facilitates U.S. attacks on Iran would amount to complicity in what he described as “aggression and war crimes”, according to Iranian state media. Baghaei urged Bulgaria not to become “an accomplice of aggressors and lawbreakers”, they said.

The tanker aircraft are mainly used for airborne refueling of other aircraft. Bulgaria’s government aims to station the U.S. aircraft at the Bezmer military facility, about 160 miles southeast of the capital Sofia. The U.S. and Iran have intensified strikes since an interim ceasefire deal signed a month ago unraveled, raising the possibility of a return to all-out war.

strikeUnverifiedUSIran
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The United States has conducted airstrikes in Iran amid threats regarding the Strait of Hormuz, while separately initiating Operation Southern Spear in November targeting vessels in the Caribbean Sea and Eastern Pacific Ocean. The operation has involved 66 strikes resulting in an estimated 221 deaths, with some reported targets unconfirmed as drug smugglers.

The administration has stated that the strikes produced a 97 percent decline in sea-bound trafficking, though independent verification of overall effectiveness and resource impact is not available.

Location: Tehran
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Vessels Xin Long Yang, carrying about 2 million barrels of Saudi crude, and Rodos, loaded with around 700,000 barrels, changed course toward the Suez Canal instead of the Bab el-Mandeb Strait, according to cited shipping data. The Houthis declared a naval blockade of Saudi ports on Monday.

Yanbu port loading continued per Reuters sources, while another vessel turned back and security firms issued transit advisories for the Red Sea.

Location: Strait of Hormuz
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Over the weekend, after exchanges where the US hit bridges and a desalination plant in Iran (reportedly repaired very quickly) and Iran’s response included hitting a much more important desalination and power plant in Kuwait and pounding important US operations in Jordan, the US attacks fell way back one night and CENTCOM and even Trump were quiet.

Some speculated that more Gulf states were denying the US the use of their airspace and the US was having to make a major regrouping. However, the US resumed strikes last night, with the pretext that the US had suffered two more military deaths on top of two just reported.

1 Trump had promised intensified strikes beginning more or less today if Iran did not return to negotiations, as in capitulate. And as many noted, the US had escalated last week, albeit not to the level of attacks during the initial phase of the war, not just with the number of strikes but also the targeting: the aforementioned desalination plant, bridges, too close for comfort to the Bushehr nuclear plant2 and to a nuclear site under development at Darkhovin.

Many have argued that the latest round of strikes look like shaping attacks in preparation for a ground operation, which pretty much everyone with even a modicum of military knowledge sees as insane.3 Daniel Davis has also mentioned in passing that despite all the noise about using ground forces and other signs of a buildup, such as more refueling tankers flying to Jordan, that Trump was shaken by the near-disaster at Isfahan, where a supposed rescue of a downed pilot resulted in the loss of more air assets than in any single engagement since Vietnam.

Many experts have contended that that was an actual operation, a botched attempt to remove some of Iran’s “nuclear dust.” However, Scott Ritter may have squared that circle. See his brief clip starting at 11:55: From a lightly-edited machine transcript: Jawaid: Scott Ritter thinks that Israeli lap dog Trump will soon launch a ground invasion of Iran, but he will fail miserably.

Also, this is something Iran has been wanting Trump to commit to for a long time. Ritter: There’s a a mission called a raid. Um, and I, you know, we already had US troops fighting on the ground. We did a raid to rescue a pilot. We were in limited ground combat operations there.

I think there’s a high potential that the US will conduct a raid here and there because that’s a that’s a a very specific task. A raid is is the only military mission where we plan to retreat. You know, every other military mission there’s no plan. You commit and you go, but a raid is in and out.

So maybe we can do a raid, but the idea that we’re going to land in seize territory, there’s zero chance that will happen because there’s zero chance of success. Now admittedly, if pilot rescue came about as the result of the botched operation in Isfahan, that would be debatable as a raid.

Even though the intent again was to retreat, the US would have had to stage equipment for the removal and transport of nuclear material, so there would be a short-lived occupation of terrain and not just a fast snatch and grab, as with Maduro. Nevertheless, the US military may not be totally suicidal, so the plan may be for a fast landing to inflict some sort of concrete form of damage that cannot be well inflicted from the air and then to decamp.

This segment also includes a very informative explanation of how important the operations in Jordan are to the US, and how the Iran intend is destroy bases so that the US has to retreat to Israel and then Iran will proceed forcefully against the remaining assets there.

We’ll soon turn to updates, but to start with some bigger picture considerations: it is disconcerting to see how many commentators resort to the trope that neither side can prevail on the battlefield, that they will in the end negotiate an outcome. As we pointed out, a study of modern wars found that more than half did not.

The distrust between the two sides, which has now reached the level of mutual loathing as a result of the fast breakdown of the already likely to fail Memorandum of Understanding (MOU), means any “deal” is vanishingly unlikely. Iran knew even before it entered into talks that the US and Israel intended to execute a “mowing the lawn” strategy, of keeping crippling sanctions in place and beating up on Iran every so often to weaken it and hopefully create severe internal divisions that would trigger an overthrow or balkanization.

Even if Iran’s 47 year record of taking severe punishment and surviving says this plot would probably fail, Iran had been preparing since the Iraq War for the US and Israel to launch a major campaign. After the illegal launch, the assassination of a major part of Iran’s leadership, as well as war crimes exemplified by the massacre of school children in Minab, the nation is highly unified around inflicting a decisive defeat on the US, so that it won’t even think about military action against Iran for at least a decade.

We were far from alone in making that case early in the war and Iran’s resolve has only stiffened as it can see how it has weakened the US while Iran has learned from combat and claims to have even bigger inventories of key weapons than it had at the start of the war.

Critically, Iranian leaders have said, bluntly, that negotiating with the US is not just pointless but also demeaning. Consider the germane parts of a recent statement by the Supreme Leader Mojtaba Khamenei,4 as summarized at PressTV: - Leader said the United States had once again violated the memorandum of understanding signed between the presidents of Iran and the US, proving that the signature of the American president is worthless and unreliable.

- He said bullying, hegemonic ambition, and savagery are inseparable characteristics of the United States and that Washington had once again revealed its true, unmasked face to the world. - He described the latest developments – US attacks against southern Iran, mainly targeting the civilian infrastructure – as further evidence of America’s deceitfulness, irrationality, unreliability, and wickedness.

- Leader said the United States is seeking to ignite further war despite facing heavier costs and greater disgrace. - He warned that the Iranian nation and the Resistance Front have unforgettable lessons for the United States, adding that the bravery of Islamic resistance fighters and the courageous people of southern Iran have already demonstrated examples of those lessons.

However, Araghchi subsequently gave an interview which can be read as pushing back against the Supreme Leader:5 Iran’s Foreign Minister Abbas Araghchi says that negotiations with the U.S. should be pursued even if the chances of success are only 10 percent, further highlighting disagreements between Iran’s political and military echelons.

“I am the Foreign Minister for the interests of… pic.twitter.com/uW1DzcfRhG — Ariel Oseran أريئل أوسيران (@ariel_oseran) July 19, 2026 Keep in mind also that China is still bleating about the need to settle the conflict and Pakistan and Qatar (among others) are also pressing for a resumption of the talks, so Araghchi as Foreign Minister has to keep the idea in play, irrespective of whether he privately places much stock in the idea.

6 And there is another way to read Araghchi’s talk: So they wanted to manufacture a clean record of “we exhausted every diplomatic option." Once that record existed, the hardliners with Mojtaba could shut the process down without looking like the ones who refused talks.

Moderates who pushed the channel now own the failure, and… https://t.co/Y63yYJVaEZ — Vonbury Research (@VonburyResearch) July 19, 2026 Kinetic action seems likely to continue to dominate: ADVISOR TO IRANIAN SUPREME LEADER, MOHSEN REZAEI, SAYING: “I declare it is over.

Both negotiation and war are over. If in the next two or three days the Americans continue the war, we will enter a phase of complete offense and destruction.”#Iran #IranWar pic.twitter.com/1M3A1pboH9 — Iran Now – WANA (@WANA_Iran) July 18, 2026 Robert Pape also seems confident that US escalation will continue7.

I found this discussion noteworthy because Andrew Neil strongly resisted the idea that there would be no negotiated ending and also found it inconceivable that Iran could become, as Pape has argued, the fourth world power. In other words, Neil seems to epitomize a set of normally pretty smart people who find it hard to see where the direction of travel is going because those outcomes so conflict with their priors: From a lightly cleaned up machine transcript: Pape: This is not what’s coming in the next few weeks likely.

What’s much more likely is he’s [Trump’s] going to do the close blockade and if he can then use the southern corridor with that close blockade to reopen the Strait, he’ll he’ll be probably satisfied with that. Very unlikely that’s going to work and that’s why you’ve got the 82nd Airborne and the Marines there to push back further.

Now, I’m not saying this is going to work, Andrew…. Neil: So, I’ve got to ask you some questions in this because I’m unclear. Do you think that the of the limited options President Trump now has, that escalation as you describe it is the most likely?

Pape: Yes. Neil: And that escalation will begin with a much more aggressive, more comprehensive a naval blockade of the Strait of Hormuz with the possibility of ground incursion on the northern side of the straight in Iranian territory? Pape: Yes. Yes, and it’s our and and the first part has already started this week.

So, so you’re already seeing in fact last week was the beginning of the air suppression campaign for this week. And as President Trump laid out the bombing schedule last night, the reason he will, if he if this keeps going forward, okay, just keep saying that if, he’s going to want to take out things like electric power and bridges is because he’s going to want to try to suppress as much of Iran’s military defenses as he can as he goes forward here.

And the military is giving him the plans for doing that. One place where I differ with Pape is that he posits that Congress might get out of bed in six months and Do Something to check Trump then. To again invoke Stein’s Law, if something cannot continue, it will stop.

The US and Israel can of course carry on with terrorism within Iran, such as assassinations and cyber attacks. But the level of weapons depletion and on current trajectories, shortly-arriving fuel shortages, seems very likely to put a choke chain on US aggression soon.

From Larry Johnson in The US Faces a Strategic Crisis with Iran…The Rapid Depletion of US Battlefield Missiles:8 The tables below are based on the most recent publicly available analyses from CSIS, the Payne Institute, and major media outlets (as of mid-2026), and provide a current (overly optimistic in my opinon) estimate for US inventory levels of these key weapons systems.

Please note that actual inventories are classified; these are informed estimates derived from DOD budget documents, procurement records, and reported expenditures during Operation Epic Fury (the US-Israeli war with Iran). Air Defense Missiles Anti-Radiation / SEAD Long-Range Strike (Ground & Sea-Launched) Missiles These are not just the numbers currently in the hands of US CENTCOM (i.

e., the US military command in charge of the war against Iran), these are the total numbers available to all of the US military commands. If these missiles are allocated evenly to the other two critical commands — i.e., EUCOM (European Command) and PACOM (Pacific Command) — then you begin to understand the gravity of this deficit.

Let’s take the case of the Tomahawk missile. Let’s assume there are 3,000 left (I believe that is a generous over estimate) and the remaining number are divided evenly among CENTCOM, EUCOM and PACOM… That means each command gets 1,000. Does anyone want to argue that in the event of a hot war with Russia or China that EUCOM and PACOM respectively would be able to sustain combat operations for more than four weeks?

Hell, CENTCOM fired 850 of them during the first four weeks of EPIC FURY. Here’s another major problem: All eight missile systems rely on rare earth elements — there are no exceptions among modern US precision-guided weapons. The dependence is nearly universal because rare earth permanent magnets are irreplaceable for the high-performance actuators, guidance motors, and seeker gimbals that make these weapons accurate.

And who controls the supply chain of these rare earth minerals? China!… The supply chain isn’t just about mining — it’s about processing, separation, and magnet manufacturing, which China controls: - Mining: China ~60% of global rare earth oxide production - Refining/Separation: China ~91% - Sintered NdFeB Magnet Manufacturing: China **~94%** Now to updates.

From Aljazeera’s live feed: - A vessel is on fire in the Strait of Hormuz after being hit by a projectile, forcing the crew to abandon ship. They were later rescued by a tugboat. - One person has been killed and several others wounded after the US military attacked the Iranian city of Tabriz in northwestern Iran.

The entries in the feed include ones describing how Mr. Market is taking cheer from the Iran Foreign Ministry admitting they are getting communiques from intermediaries and reviewing them as if they originated from the US. Recall that the negotiators have often developed ideas and tried to sell both sides on them.

Bloomberg’s Javier Blas, who has been a consistent seller of lower oil prices, is refreshingly precise about Iran not saying either way as to whether the missives were from the US or just the negotiators operating on their own: Iran has received “some proposals” from unspecified mediators regarding the war with the US, Iranian Foreign Ministry Spokesman Esmail Baghaei says in press conference, without elaborating.

— Javier Blas (@JavierBlas) July 20, 2026 Contrast that with the Aljazeera account: Oil prices ease after Iran says US contacts continuing through mediators Oil prices have scaled back their gains after hitting their highest in a month after Iran said diplomatic exchanges with the US are ongoing via mediators despite renewed conflict in the Middle East.

Grr. Another Aljazeera live feed entry: Iran ‘counting down the minutes’ for US ground invasion [Today’s Iran war post launched more or less complete. I will be off duty for a while. If there are any updates, they will come in the comment section later] Foreign Ministry spokesperson Esmaeil Baghaei says the United States will face “consequences of any adventure” to seize Kharg Island in southern Iran.

He added there are people in Iran’s leadership “counting down the minutes to welcome” US forces in any ground invasion. Kharg is the heart of Iran’s oil industry. It sits 55km (34 miles) off Iran’s coast in Bushehr province. President Trump has repeatedly threatened to seize the territory during the war.

A raid on Kharg could fit Ritter’s raid scenario, with the US busting things up and then leaving.9 But experts have pointed out that Iran has at least four other export routes. Kharg is the most efficient but losing it while being repaired would be inconvenient as opposed to a fatal blow.

From Bloomberg’s landing page: From US Bombs Iran for Ninth Day as Standoff Over Hormuz Deepens: The US conducted a ninth straight day of airstrikes on Iran, trying to force the Islamic Republic to stop shipping attacks and reopen the Strait of Hormuz.

The American military bombed military targets and communications networks in a three-hour operation ending around 5:30 a.m. Iranian time on Monday. Iran continued to attack US bases in the likes of Kuwait, Jordan, Bahrain and Iraq. The standoff shows no sign of easing, with Iran refusing to relent over Hormuz and insisting it has a right to manage traffic through the waterway.

Energy prices have jumped on the worsening hostilities. Brent crude oil rose to above $90 a barrel for the first time in more than five weeks in early trading on Monday. US gasoline prices climbed back over the $4-a-gallon mark, potentially hurting President Donald Trump and his Republican party ahead of midterm elections in November… Hormuz Shipping Traffic Slumps as US-Iran Hostilities Worsen The tit-for-tat attacks are getting deadlier….

Shipping volumes have slumped and the number of tankers and other vessels going through Hormuz is roughly down to the same level from the height of the conflict in March and early April… US President Donald Trump warned Iran last week he’d escalate airstrikes and widen the scope of targets until it backed down… Kuwait continues to experience some of the worst attacks from Iran.

Over the weekend, Kuwait’s main state energy company said an unspecified site sustained “significant material losses,” causing its evacuation and a number of injuries, while two power and desalination plants have been hit in recent days. And from Hormuz Traffic Near Standstill as US-Iran Hostilities Escalate: - Visible traffic through the Strait of Hormuz appeared at a near standstill Monday after Iran targeted vessels in the narrow waterway.

- A Marshall Islands-flagged bulk carrier and a liquefied petroleum gas carrier appeared to approach the strait, with the bulk carrier turning off its transponder while approaching. - The targeting of vessels will likely raise fresh concerns over the safety of ships transiting Hormuz, which could deepen disruptions to energy flows from the Persian Gulf to global customers.

Indirectly importance of US operations in Jordan, the lead story in the Wall Street Journal is Jordan Becomes New Flashpoint in U.S.-Iran War as Troop Deaths Rise. But it fails to set forth any of the juicy details that Janta Ka presents. This is the thin strategic gruel offered: For years, Jordan sought to play down its close military and intelligence cooperation with the U.

S. The U.S. aircraft that carried out strikes on Islamic State from a base in Jordan during the American war with the militants didn’t advertise the country they were operating from. But Jordan’s role is now becoming too prominent to obscure. Jordan has become an attractive location for U.

S. armed forces since it is among the most permissive in the Arab world when it comes to allowing the U.S. to operate from its bases. A bit more on Jordan: The view from Tehran. “The increased focus on Jordan may serve as part of Iran’s preparation and testing of operational concepts for more intense and precise strikes against Israel in later stages of the conflict.

Qatar and Saudi Arabia—have at times sought to impose limits… — Policy Tensor (@policytensor) July 20, 2026 By contrast, the House of Saud published a remarkably revealing document (hat tip Eugene Linden), Iran Struck Prince Sultan and No One Was Required to Say So: Iranian ballistic missiles struck Prince Sultan Air Base in Al-Kharj on July 18, wounding twelve US service members — two critically — and hitting KC-135 Stratotankers on the flight line while a second rotation was still climbing out.

Saudi Arabia’s Civil Defense Authority cleared the sirens six minutes later without naming the weapon, the origin, or the damage, and neither Riyadh nor Washington has issued an official statement since. The strike was the first direct Iranian attack on Saudi territory in approximately four months, a gap during which the IRGC struck Kuwait, Bahrain, Jordan, Qatar, and the UAE while conspicuously sparing the Kingdom.

Its return to PSAB — confirmed by a US official to Axios, corroborated by satellite imagery, and detailed by Air & Space Forces Magazine — ended whatever territorial immunity Saudi Arabia believed it still possessed. But the more consequential development is not the strike itself.

It is the silence that followed, and the institutional architecture that sustains it: a three-party managed ambiguity in which Iran, Saudi Arabia, and CENTCOM each benefit from leaving the damage question unanswered, because answering it would force a public reckoning with a PAC-3 reserve that is approaching a ceiling none of them can afford to name.

The strike was confirmed by a US official cited by Axios as “the first time the Islamic Republic has directly attacked the kingdom in four months” — a description that the State Department, the Pentagon, and the Saudi Ministry of Defence have each declined to repeat on the record.

Air & Space Forces Magazine, drawing on multiple US military sources, reported at least twelve wounded and multiple Stratotankers damaged on the tarmac. Open-source satellite imagery corroborated the impact site within the base perimeter. Iran’s state broadcaster supplied what no government would.

The missiles were launched “moments after American refueling planes took off,” a detail that only makes sense if the IRGC had real-time ISR coverage of PSAB’s tanker rotation schedule. The aircraft hit were those that remained on the flight line after the airborne pair departed — the timing was deliberate, and the targeting message was not about maximising destruction but about demonstrating that PSAB’s daily operational patterns are watched, clocked, and within reach….

Riyadh cannot confirm the strike without confronting two questions it has spent the war avoiding. The first is defensive: if Iranian missiles hit PSAB and wounded US personnel, the Sakhir Declaration — the mutual defence framework Saudi Arabia negotiated with Washington — becomes the operative instrument, and invoking it requires publicly admitting what the Arab Center DC described as the core strategic dilemma: “the PAC-3 architecture is functionally exhausted.

” The second is economic. Aramco’s August Arab Light OSP already dropped $11 month-on-month to $1.50 per barrel below Oman/Dubai, the largest such cut in over two decades and the lowest since June 2020. Confirming that Iranian ballistic missiles are landing on military installations 77 kilometres south of the capital forces a sovereign-risk reassessment that Riyadh’s fiscal position — a Q1 deficit of SAR 125.

7 billion, with Aramco’s free cash flow at 0.85 times its quarterly dividend — is not structured to absorb…. Washington faces a different but parallel constraint. Confirming the strike means confirming that 2,300 US service members at PSAB are taking casualties at a base where 43 US warplanes have been grounded since Saudi Arabia’s Operation Project Freedom in May 2026.

CENTCOM cannot describe a defensive engagement at PSAB without also describing the legal anomaly: the 1977 USMTM memorandum governing US presence is not a Status of Forces Agreement, and Project Freedom severed the operational relationship between American air power and Saudi host-nation authority.

An official statement would invite the Congressional question that the Pentagon’s communications strategy is built to defer: why are American troops still at a base where their aircraft have been grounded by the host nation, absorbing Iranian fire under a legal framework that was designed for peacetime advisory missions?

Please read this article in full. It contains remarkable operational detail. It is over my pay grade as to why it was published, but it seems to suggest considerable unhappiness at Riyadh. Due to the length of this post, we have skipped over the fact that Ansar Allah seems just about to threaten or actually close the Bab el-Mandeb strait: 🚨 BREAKING 🇾🇪 YEMEN’S HOUTHI FORCES WILL MAKE A “HUGE” ANNOUNCEMENT TODAY AT 8:30 AM ET.

REPORTS EXPECT THEM TO ANNOUNCE A BLOCKADE OF THE BAB EL-MANDEB STRAIT. TOGETHER WITH THE STRAIT OF HORMUZ, THESE TWO CHOKEPOINTS HANDLE OVER 25% OF GLOBAL SEABORNE OIL TRADE. IF TRUE,… pic.twitter.com/yjavHpPKOi — Wimar.X (@DefiWimar) July 20, 2026 This does not look terribly negotiation-receptive.

And some additional sightings from Twitter: Israelis have never felt less secure. 64% are unhappy with how the endless wars have been run. 73% are upset at how there has been no real investigation of October 7. 73% of the public also feel the government has not dealt well with the rise in crime.

No one wins from these… https://t.co/4OjhLUD14O — Shaiel Ben-Ephraim (@academic_la) July 19, 2026 These remarks would seem to negate happy thinking about negotiations: ⚡️⭕️ Iran's Foreign Ministry spokesperson Esmaeil Baghaei says Tehran is determined to exercise sovereignty over the Strait of Hormuz through measures already taken, and states the US failed to fulfill its commitments under a memorandum of understanding, so Iran will not fulfill… — Middle East Observer (@ME_Observer_) July 20, 2026 The average price for a gallon of gas hit $4, the second time it has reached that benchmark since the war in Iran disrupted global oil supplies https://t.

co/Cg8rE3XnJ7 pic.twitter.com/3UqHfwU4sc — CNN (@CNN) July 20, 2026 Done for today! See you tomorrow! ____ 1 What kind of admission of weakness is this? Part of the job description of a service member is that they may wind up dying for their country.

Admittedly, the US is widely suspected of suffering a much higher body count and covering that up. But this show of extreme sensitivity to losses again shows the US has a glass jaw. 2 Nima also discusses at some length at the top of a new talk with Larry Johnson why they look misguided.

He knows Bandar Abbas well, which is where the US has been hitting bridges so as to isolate it. Nima explains and even shows pictures that the bridges exist only to cope with seasonal floods for a few months a year. Those sluices are dry now, so Bandar Abbas is easily accessible by all sorts of routes.

3 🚨 BREAKING: Russia has evacuated 198 of its personnel from the Bushehr Nuclear Power Plant in Iran. It is believed that the plant could be targeted again. pic.twitter.com/lPoQB05qgo — GBC (@GBC_Press) July 17, 2026 4 A new trope in the US-backing commentary community is to depict the new Supreme Leader as a figurehead, which is easy to make stick given his lack of public appearances (I suspect that among other things, he is having facial reconstruction; that can take an extremely long time since procedures are done serially with healing time in between).

I believe it was on a recent Dialogue Works talk where Professor Marandi debunked one popular claim, that he IRGC was operating on its own authority. Professor Marandi described the governing structure and said the military (both the regular forces and the Guards) needed approval of the Supreme Leader for its operations.

Having said that, I have commented that Iran seems to have a Japanese-style decision-making structure, as in more bottoms-up than the West. That results in more time to make decisions but much more internal cohesion when they are reached, since those at lower levels would be able to voice concerns and make suggestions.

Upon reflection, this would make sense given that Iran adopted its “mosaic” structure of extreme decentralization so as to allow it to function well even when the leadership was killed or incommunicado, as we saw at the onset of the current conflict.

In the Japanese model, decisions are effectively made at the senior-middle level ranks, which does tend result in the board and CEO being ceremonial. But the top level can and does say no, or effectively does so by asking probing questions and sending the matter back down the chain for further study and perhaps some revision.

I have been involved in decisions in Japan where the board and CEO were highly engaged, and these were ones that were of critical strategic importance. 5 DropSite has a longer recap of Araghchi’s remarks: ⭕️ Iran FM Araghchi: Wars End Either Through Total Victory or Negotiations… Foreign Minister Abbas Araghchi: 🔹 A war must be ended precisely at the point when you hold the upper hand on the battlefield.

Ending a war is possible either through total military victory or… pic.twitter.com/kHeYhShsXC — Drop Site (@DropSiteNews) July 20, 2026 IMHO his analysis is wrong-headed. As indicated above, a bit over half the modern wars do not end with a negotiated settlement.

And it is a false dichotomy to say that to win, Iran must conquer the US and Israel. FFS, please explain Vietnam. Bad logistics and depleting weapons mean that ex nukes, the US cannot win against Iran. The question is how long it takes and how much damage is done not just to Iran but also the world economy.

Keep in mind the intermediaries are still busy but motion is not progress: #Iran's Foreign Ministry Spokesperson has confirmed that Tehran has received "ideas and proposals" from mediators. He declined to provide any further details regarding the specifics of the mediation efforts.

pic.twitter.com/8Pzs25eauc — Iran Nuances (@IranNuances) July 20, 2026 6 A memorable scene in the Daniel Ellsberg memoir Secrets is when Ellsberg, widely seen as the top US expert on Vietnam, briefed McNamara in a helicopter about how badly things were going.

McNamara said, “Just as I suspected,” and then upon landing updated the press on the great progress the US was making. 7 It has taken me too long to see why Pape often acts as if he is speaking to children or the stoopid. Making this his normal manner of presentation means that when he actually is having to speak to someone who is being stoopid, they won’t take offense.

8 However, to quibble with Johnson on another matter: he has been saying, as he does in the talk linked in Footnote 2 above, that the Iran attacks on a former US base in Syria, Al Tanf, were pointless because the base had been vacated for years. Vanessa Beeley, who has spent a lot of time on the ground in Syria and still has contacts there, begs to differ.

She says the base was recently restored to service. From Why did Iran target the US Occupation base at Al Tanf, Syria? On Friday 17th July, Iran carried out an extensive attack on the US occupation base at Al Tanf in Syria. A drone and missile strike targeted a US Special Operations Command base in south-eastern Syria..

the first strike on Syrian territory since the toppling of the former government in December 2024. In a statement, the IRGC said its aerospace forces conducted what it described as the 11th phase of “Operation Nasr-2,” targeting the strategically located base near Syria’s borders with Iraq and Jordan.

The IRGC further claimed the attack destroyed a radar installation and several U.S. military helicopters, while alleging that many American personnel were killed. This strike occurred as the build up of both Turkish and HTS military forces increases inside Syria, along the border with Lebanon and in the coastal region to the north of Lebanon.

I have been reporting on this here and here. Syrian sources provided more detail on the attack: Despite previous reports of an almost total evacuation of the Al Tanf base, located on the borders of Syria, Iraq and Jordan, almost 5 months ago – the intensity of the strikes suggested a shift in the site’s operational status.

This was not an empty base, in fact, according to sources, the IRGC’s tracking systems and human intelligence in the region detected U.S. forces airdropping “Special Forces” units into the base approximately two weeks before the attack. Analysis would suggest that the purpose of these drops might be to prepare for a ground incursion across Iraqi territory (Sulaymaniyah Axis) in coordination with the local Kurdish separatist factions in Iraq.

One military analyst told me: The attack reflects the operator’s ability to breach the secrecy surrounding U.S. movements and to convert radio and visual data into precise target coordinates. According to reports from inside Syria, the strikes inflicted direct damage on the base’s newly constructed infrastructure, neutralised the US elite combat force and derailed the Iraq-Axis operation against Iran.

Of course, US media will not report on the planned operations or on the number of casualties – such a critical security breach and the significant scale of damage, as reported, will not be revealed. 9 Maybe mines?