Period:
What changed last week
What happened, and how did it change the picture? Read the confirmed developments alongside the questions that remain open.
Energy risk reconnected rates and inflation
The end of the U.S.-Iran negotiating deadline renewed energy supply risks as long-term yields rose on fiscal and government-bond supply concerns. FOMC minutes and inflation in the United Kingdom and Japan reinforced the constraints on rapid monetary easing.
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- Futures Compass
The week at a glance
The week of August 16–22 began with the expiration of the U.S.-Iran negotiating deadline and continuing uncertainty over transit through the Strait of Hormuz. The two sides offered conflicting accounts of the strait’s status, and with actual traffic still limited, supply risk returned to the center of oil and inflation assessments.
Energy risk overlapped with fiscal and sovereign-debt supply concerns, prompting a global selloff in long-dated bonds. Expanded U.S. Treasury liquidity-support buybacks did not reverse the rise in yields for long. The FOMC minutes and inflation releases from the United Kingdom and Japan pointed to a shared constraint despite different national paths: policymakers still needed more evidence that inflation would stay contained.
Week in review · Topics and sources
The expired deadline renewed uncertainty around Hormuz
The U.S.-Iran deadline passed without a final agreement, while conflicting claims about the strait’s status returned supply risk to the center of oil and inflation analysis.
Verified facts
- 01
AP reported that the 60-day negotiating deadline set in June expired on August 17 without a final agreement covering an end to the war and Iran’s nuclear program. [1]
- 02
Reuters reported that the U.S. president said no talks were underway and the Strait of Hormuz was open, while Iran said it would remain closed until the United States fulfilled the terms of an interim agreement. [2]
- 03
Preliminary vessel data cited by Reuters showed that the number of ships passing through the Strait of Hormuz remained in the single digits on August 17. [2]
- 04
In its August 19 report, the EIA said U.S. commercial crude inventories rose by 4.4 million barrels to 428.8 million barrels in the week ended August 14. [3]
- Persistent disruption to vessel traffic could pass through oil, freight, and insurance costs into consumer prices and long-term yields. Larger U.S. crude inventories and sufficient alternative shipments could partly cushion an immediate shortage, but would not by themselves settle the reliability of the route.
- Because the two sides offered conflicting claims about whether the strait was open, neither account could be treated as independently established fact. A recovery in vessel counts, cargo volumes, insurance conditions, and alternative supply would reduce the geopolitical risk premium.
What to watch next
- Independently verified vessel counts and cargo volumes through the Strait of Hormuz
- U.S.-Iran negotiations and regional mediation
- EIA commercial crude and product inventories and the Strategic Petroleum Reserve
Related markets
Context source: [4]
The long-bond selloff exposed fiscal and inflation risks
Long-term yields across major markets reached multiyear or multidecade highs, while the U.S. Treasury expanded its liquidity-support buyback limits for longer maturities.
Verified facts
- 01
Reuters reported on August 18 that the U.S. 30-year Treasury yield reached 5.321%, its highest level since 2007, while long-term yields in Japan, France, and Germany also climbed to levels not seen in years. [4]
- 02
On August 19, the U.S. Treasury announced that it would increase the maximum size of each liquidity-support buyback in the 10- to 30-year nominal coupon sector from $2 billion to at least $4 billion. [5]
- 03
The expanded U.S. Treasury buyback schedule applies from September 9 through November 4, 2026. [5]
- 04
AP reported that the U.S. 10-year yield rose back to 4.69% and the 30-year yield to 5.23% on August 20, reversing much of their decline immediately after the Treasury announcement. [6]
- Long-term yields reflect not only oil and expected inflation but also fiscal deficits, bond supply, term premiums, and policy credibility. A higher long-term discount rate can weigh particularly on technology companies whose valuations depend heavily on future earnings and on sectors reliant on long-duration borrowing.
- The selloff could not be attributed to the U.S.-Iran conflict alone; fiscal concerns, issuance, and thin summer liquidity also mattered. Treasury buybacks were designed to support market liquidity, not to provide quantitative easing or reduce the fiscal deficit.
What to watch next
- The split in nominal yields between real rates and expected inflation
- Demand at U.S. long-term Treasury auctions and changes in the term premium
- Buyback results from September and the next quarterly borrowing plan
Related markets
The FOMC kept conditional tightening on the table
The July minutes showed that a meaningful group of participants would consider further tightening if inflation failed to move lower.
Verified facts
- 01
The Federal Reserve released the minutes of its July 28–29 FOMC meeting at 2 p.m. ET on August 19, or 3 a.m. KST on August 20. [7]
- 02
The committee voted 9–3 to keep the federal funds target range at 3.50% to 3.75%, with three members preferring a 25-basis-point increase. [7]
- 03
The minutes recorded that several participants favored an increase at the July meeting and that many judged further tightening might be necessary if inflation did not decline. [7][8]
- 04
Federal Reserve staff assessed risks to growth as tilted to the downside and risks to inflation as tilted to the upside, identifying geopolitical developments in the Middle East as a major uncertainty. [7]
- The minutes did not preannounce an immediate increase; they clarified the conditions under which officials could tighten if disinflation stalled. If elevated long-term yields and the possibility of a policy-rate increase persisted together, the pressure on equity and credit markets could compound.
- The document reflected information available through July 29 and was not a new policy decision incorporating events from mid-August. The minutes’ reference to many participants also did not specify the number of votes that would support an increase at the next meeting.
What to watch next
- July personal consumption expenditures inflation and subsequent employment data
- Jackson Hole remarks and Federal Reserve communication before the September meeting
- The September FOMC decision and economic projections
Related markets
Inflation passed through differently in the U.K. and Japan
U.K. inflation accelerated and Japan’s core measures moved closer to 2%, showing that energy transmission and policy constraints differed across economies.
Verified facts
- 01
The U.K. consumer price index rose 2.9% from a year earlier in July, up from 2.6% in June, while CPIH inflation, which includes owner occupiers’ housing costs, increased from 2.8% to 3.1%. [9]
- 02
The U.K. Office for National Statistics said housing and household services made the largest contribution to the increase in annual inflation, while gas prices rose 14.7% in July from the previous month. [9]
- 03
Japan’s consumer price index rose 1.9% from a year earlier in July. The index excluding fresh food increased 1.8%, while the index excluding fresh food and energy rose 1.9%. [10]
- 04
Japan’s Statistics Bureau began using the 2025-base consumer price index with the July release, and Reuters reported that inflation excluding fresh food accelerated from 1.6% in June to 1.8% in July. [10][11]
- The same energy shock can pass through with different lags: through regulated price-cap adjustments in the United Kingdom and through exchange rates and import costs in Japan. The Bank of England and Bank of Japan paths therefore required separate analysis of wages, services, and currencies rather than one global inflation signal.
- One month of acceleration was not enough to establish a persistent rebound. U.K. price caps incorporate an earlier wholesale-price assessment window, while comparisons for Japan should use the recalculated historical series after the base-year change.
What to watch next
- U.K. services inflation and wage growth
- Japanese wages, import prices, and the yen
- September decisions from the Bank of England and Bank of Japan
Related markets
Sources and evidence
Follow a source number in the text to its reference below. Primary documents and independent reporting let you check the facts for yourself.
- [1]AP · U.S.-Iran 60-day negotiating deadline
Independent reporting on the expired deadline and the absence of a final agreement
- [2]Reuters · Conflicting U.S.-Iran claims about Hormuz
Opposing accounts of the strait’s status and preliminary vessel-traffic data
- [3]U.S. Energy Information Administration · Weekly Petroleum Status Report, August 19
U.S. commercial crude inventories for the week ended August 14
- [4]Reuters · Global long-bond selloff
Long-term yields across major markets in the context of energy and fiscal risks
- [5]U.S. Department of the Treasury · Expansion of long-term liquidity-support buybacks
Buyback limits, maturity sectors, and the implementation schedule
- [6]AP · Bond markets after the Treasury buyback announcement
Long-term yields and the limited stabilization following the announcement
- [7]Federal Reserve · Minutes of the July 2026 FOMC meeting
The vote, participants’ views, and assessments of growth and inflation risks
- [8]AP · FOMC minutes and conditional tightening
Independent reporting used to cross-check the minutes’ discussion of further tightening
- [9]U.K. Office for National Statistics · Consumer price inflation, July 2026
CPI and CPIH rates and the contributions from gas and housing costs
- [10]Statistics Bureau of Japan · Consumer Price Index, July 2026
Headline and underlying inflation measures and the transition to the 2025 base
- [11]Reuters · Japan’s July inflation and monetary policy context
The month-to-month direction of inflation excluding fresh food and the import-cost backdrop