Middle East Conflict Continues to Escalate, Fueling Oil Supply Concerns and Interest Rate Pressure

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Summary:

The U.S. Energy Secretary said military operations against Iran will continue; Hammack: U.S. inflation remains too high......

Highlights

Israeli military chief: Israel is prepared to resume operations against Iran

Iraq seeks to expand output to offset losses from disruptions in the Strait of Hormuz, with previous exports reaching 1.5 million barrels per day

U.S. Energy Secretary says military operations against Iran will continue

Hammack: U.S. inflation remains too high

Details

Israeli military chief: Israel is prepared to resume operations against Iran

Israeli Defense Forces Chief of Staff Eyal Zamir said on July 19 that the Israeli military is closely monitoring Iran’s missile launch activities and is prepared to resume military operations against Iran at any time. He noted that Iran had launched missiles toward Jordan’s Aqaba region that day, prompting Israeli air defense systems to remain on high alert.

The Israeli military issued a statement that afternoon, saying it had launched multiple interceptor missiles after detecting Iranian missiles heading toward Jordan in order to prevent missile debris from falling into Israeli territory. Some debris landed in open areas near Eilat, a southern Israeli city close to Jordan.

Zamir’s remarks came amid continued escalation in the military confrontation between the United States and Iran. Iran has recently intensified attacks on U.S. military targets in the Middle East, while Israel, as a key U.S. ally in the region, has seen its military readiness closely watched by markets. Any change in Israel’s posture could further heighten regional tensions.

Iraq seeks to expand output to offset losses from disruptions in the Strait of Hormuz, with previous exports reaching 1.5 million barrels per day

Iraq’s oil minister revealed that before the escalation of hostilities between the United States and Iran, the country’s daily oil exports through the Strait of Hormuz and the Ceyhan pipeline reached 1.5 million barrels. The ongoing geopolitical conflict has now created significant disruptions to this crucial export route.

Iraq is seeking to substantially increase exports to offset financial losses caused by restrictions on traffic through the Strait of Hormuz. The country has set an oil production target of 7 million barrels per day, representing significant growth potential compared with current output levels.

Strategically, Iraq is also advancing plans to expand refining capacity and petroleum product production. The goal is to extend the value chain, reduce reliance on direct crude oil exports, and strengthen domestic energy security.

The market’s focus will be on whether Iraq can achieve additional export capacity through the Ceyhan pipeline or other alternative routes if disruptions in the Strait of Hormuz continue, as well as how quickly its production targets can be realized and how this will affect global oil supply expectations.

U.S. Energy Secretary says military operations against Iran will continue

U.S. Energy Secretary Chris Wright said that U.S. military operations against Iran will continue until President Donald Trump achieves his objectives. In an interview, Wright stated that the Trump administration’s goals are to prevent Iran from obtaining nuclear weapons and to weaken its ability to threaten neighboring countries and global commercial activities. Therefore, the mission will continue until its objectives are fulfilled.

On July 18 local time, U.S. Central Command announced on social media that it had ended the eighth consecutive night of strikes against Iran at 23:30 Eastern Time. Earlier, Central Command reported that two U.S. service members were killed in an Iranian attack in Jordan, while another remained missing.

Hammack: U.S. inflation remains too high

Cleveland Federal Reserve President Beth Hammack said on Friday that persistently high inflation remains her primary concern, despite resilient consumer spending and a low unemployment rate.

Hammack stated that the Federal Reserve’s dual mandate — maintaining price stability and promoting maximum employment — does not necessarily create a conflict. On one hand, inflation remains too high; on the other hand, the labor market is operating close to full employment.

Dallas Fed President Lorie Logan also called for further interest rate increases on the same day, arguing that inflation does not appear to be consistently moving back toward the Federal Reserve’s 2% target.

An increasing number of Fed officials have recently warned that if inflation fails to continue declining toward the 2% target, the central bank may need to raise interest rates again soon. The Federal Reserve’s latest economic projections released in June showed that half of the 18 policymakers expected at least one more rate hike this year, with each increase projected at 25 basis points. A small number of officials believed conditions already justified a rate increase at the previous meeting.

Today’s Key Events

14:00 (UTC+8) Germany June PPI MoM

20:30 (UTC+8) Canada June CPI

22:00 (UTC+8) U.S. June Conference Board Leading Economic Index MoM

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